/raid1/www/Hosts/bankrupt/TCREUR_Public/130918.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Wednesday, September 18, 2013, Vol. 14, No. 185
Headlines
F R A N C E
CLAYAX ACQUISITION 4: S&P Assigns 'B' Senior Secured Rating
G E R M A N Y
GERMAN RESIDENTIAL: S&P Withdraws 'BB+' Ratings on 2 Note Classes
LOEWE AG: Plans to Cuts Jobs at All Divisions on October 1
H U N G A R Y
E-STAR: To Transfer New Shares to Creditors in Debt-Equity Swap
I R E L A N D
ANGLO IRISH: Former Bank Customers Blast Chapter 15 Bid
NOSTRUM MORTGAGES 2003-1: Deal Amendments No Impact on Ratings
PARIS BAKERY: Faces Winding-Up Order in High Court
QUOKKA FINANCE: S&P Withdraws 'B-' Rating on Class E Notes
I T A L Y
BANCA MONTE: Fitch Lowers Viability Rating to 'ccc'
MANUTENCOOP FACILITY: S&P Assigns 'B+' CCR; Outlook Stable
RIVA GROUP: Future Rests in Government Hands After Asset Seizure
L U X E M B O U R G
EUROMAX III: Fitch Affirms 'CC' Rating on Class B Notes
N E T H E R L A N D S
NORTHERN LIGHTS: Moody's Cuts Rating on US$150MM Notes to 'B1'
R O M A N I A
AVERSA: New Owner No Plan to Change Management Structure Yet
S P A I N
CODERE SA: ISDA to Issue Default Swaps Ruling on Bond Payment
EMPRESAS HIPOTECARIO: S&P Lowers Rating on Class B Notes to 'D'
PESCANOVA SA: Cartersian Mulls Legal Action v. BDO Over Audit
RURAL HIPOTECARIO XV: Fitch Corrects July 19 Ratings Release
RURAL HIPOTECARIO XIV: Fitch Corrects July 16 Ratings Release
RURAL HIPOTECARIO XVI: Fitch Corrects July 19 Ratings Release
U K R A I N E
INTERPIPE LIMITED: Fitch Lowers LT Issuer Default Rating to 'CCC'
U N I T E D K I N G D O M
CO-OPERATIVE BANK: Hedge Funds Propose Debt-for-Equity Swap
ECO-BAT TECHNOLOGIES: Moody's Cuts CFR to B1; Outlook Stable
HYPERION INSURANCE: Moody's Assigns B2 CFR; B1 Debt Ratings
HYPERION INSURANCE: S&P Assigns Prelim. 'B' CCR; Outlook Stable
JERROLD HOLDINGS: S&P Assigns 'B+' LT Counterparty Credit Rating
JERROLD HOLDINGS: Fitch Publishes 'B+' Issuer Default Rating
NTP Kitchens: In Receivership; 29 Jobs Affected
PHONES4U FINANCE: S&P Affirms 'B' CCR; Outlook Stable
PHOSPHORUS HOLDCO: Moody's Rates New GBP200MM Notes '(P)Caa2'
*********
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F R A N C E
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CLAYAX ACQUISITION 4: S&P Assigns 'B' Senior Secured Rating
-----------------------------------------------------------
Standard & Poor's Ratings Services said it assigned a recovery
rating of '4' to the new EUR400 million term loan C facility due
2018 borrowed by France-based multi-technical services provider
Spie Bondco 3 S.C.A.'s financing vehicle Clayax Acquisition 4 SAS
(French Bidco) on July 24, 2013. At the same time, S&P revised
its recovery ratings on Spie's existing revolving credit facility
(RCF) of EUR200 million, capital expenditure (capex) facility of
EUR100 million, and term loan B of EUR585 million, to '4', from
'3'. The issue ratings on all these debt instruments are
unchanged at 'B', the same level as the corporate credit rating
on Spie. At the same time S&P affirmed its recovery rating of
'6' on Spie's EUR375 million senior unsecured notes due 2019 and
S&P left its 'CCC+' issue rating unchanged.
S&P's assignment of a recovery rating of '4' to the new facility
reflects "average" recovery expectations at the high end of the
30%-50% range in the event of a payment default.
The increase in senior secured debt resulting from the borrowing
of the term loan C facility has led to a dilution of recovery
prospects of the secured credit facilities' debt from the low end
of the 50%-70% range to the high end of the 30%-50% range. This
has led S&P to revise its recovery ratings on Spie's existing RCF
facility of EUR200 million, capex facility of EUR100 million, and
term loan B of EUR585 million to '4' from '3' and to assign a
recovery rating of '4' to the new term loan C.
The recovery ratings on the new term loan C and on the remaining
tranches of the secured credit facilities are supported at the
'4' by S&P's view of the Spie group's enterprise valuation, which
is a result of the group's large customer base and good product
diversification. The recovery rating is also supported by the
security package, which S&P views as fair, although not
comprehensive. Recovery prospects for the facilities are
constrained, by the significant amount of first-lien debt and by
Spie's jurisdiction, France, whose insolvency regime S&P sees as
less creditor-friendly than other European insolvency regimes.
The recovery rating on the EUR375 million senior unsecured notes
is constrained at '6' by their contractual subordination to the
sizable senior secured credit facilities.
The shared documentation for the credit facilities includes
maintenance financial covenants and some nonfinancial covenants.
As per the restated documentation, the group can now raise
incremental facilities of up to EUR300 million, subject to
compliance with the financial covenants of the senior secured
facilities. The documentation also allows the company to put in
place a securitization facility of up to EUR350 million, of which
EUR275 million was drawn at the end of June 2013.
To calculate recovery prospects, S&P simulates a default
scenario. We project that a hypothetical default for Spie would
take place in 2015, as a result of weakened operating performance
in the current economic climate and tough competition. S&P
calculates a gross stressed enterprise value of about EUR1.1
billion at the hypothetical point of default.
After deducting priority liabilities of EUR479 million--
comprising enforcement costs, local overdraft facilities, finance
leases, 50% pension obligations, and the securitization facility-
-S&P arrives at a net stressed enterprise value of about EUR659
million. S&P assumes that the advance-payment guarantees for
customers would come into effect in the event of a payment
default, and therefore deduct an amount of about EUR97 million
along with the outstanding senior secured credit facilities from
the stressed enterprise value. This would allow for recoveries
at the high end of the 30%-50% range for the EUR1.4 billion of
senior secured debt outstanding, including six months of
prepetition interest, resulting in our '4' recovery rating on
this debt. S&P's stressed enterprise valuation would leave
negligible (0%-10%) recovery for the EUR375 million senior notes
due 2019, which results in its recovery rating of '6' on these
notes.
RATINGS LIST
New Rating
Clayax Acquisition 4 SAS(French Bidco)
Senior Secured* B
Recovery Rating 4
Senior Secured
EUR200 million Term Loan A NR
Ratings Affirmed
Spie Bondco 3 S.C.A.
Senior Unsecured* CCC+
Recovery Rating 6
Clayax Acquisition 4 SAS(French Bidco)
Senior Secured* B
Revised
Clayax Acquisition 4 SAS(French Bidco)
Recovery Rating To From
4 3
*Guaranteed by Financiere SPIE.
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G E R M A N Y
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GERMAN RESIDENTIAL: S&P Withdraws 'BB+' Ratings on 2 Note Classes
-----------------------------------------------------------------
Standard & Poor's Ratings Services has withdrawn its credit
ratings on German Residential Funding PLC's class A1 to E notes.
The withdrawals follows S&P's receipt of the cash manager's
report, which confirms that all outstanding notes fully redeemed
on the August 2013 interest payment date.
German Residential Funding was a German commercial mortgage-
backed securities (CMBS) multifamily transaction, with loan
maturity in August 2013 and note final maturity in August 2018.
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
Ratings Withdrawn
German Residential Funding PLC
EUR2.66 Billion Commercial Mortgage-Backed Floating-Rate Notes
A1 NR A (sf)
A2 NR A (sf)
B NR A- (sf)
C NR BBB (sf)
D NR BB+ (sf)
E NR BB+ (sf)
NR-Not rated.
LOEWE AG: Plans to Cuts Jobs at All Divisions on October 1
----------------------------------------------------------
Alexander Kell at Bloomberg News reports that Loewe AG said it
plans to cut jobs at all divisions effective Oct. 1.
According to Bloomberg, the company said that the completion of
the restructuring measures paves way for the arrival of a new
investor.
As reported by the Troubled Company Reporter-Europe on July 17,
2013, Reuters related that Loewe filed for protection from
creditors' demands in a last-ditch effort to turn around its
loss-making business. Loewe has been struggling to return to
profit amid fierce competition from Asian rivals such as Samsung
and LG Electronics and a slide in the average price of television
sets, Reuters disclosed. Its losses almost tripled to
EUR29 million in 2012, Reuters noted. The company, which is 28%
owned by Japan's Sharp, filed for protection from creditors at a
German court, under a law that gives firms up to three months of
breathing room to try to fix their finances to stave off
insolvency, Reuters said.
Loewe AG is a German high-end television maker.
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H U N G A R Y
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E-STAR: To Transfer New Shares to Creditors in Debt-Equity Swap
---------------------------------------------------------------
MTI-Econews reports that E-Star said Monday it had made an
important step towards the realization of a recent settlement
with creditors after a capital raise has been registered by the
Budapest Metropolitan Court.
According to MTI-Econews, the new shares will be soon transferred
to creditors in a debt-equity swap which has been part of an
agreement between the company and its creditors.
The capital raise increased the registered capital of the company
rose from HUF26.4 billion to HUF525.3 billion through the issue
of 49,891,445 new ordinary shares, MTI-Econews discloses.
The new shares, which have a nominal value of HUF10 each, were
subscribed at HUF366 by four selected companies: E-Star
Reorganizacio-01, E-Star Transzfer-02, E-Star Debt-Equity-03 and
E-Star Capital-Share-04, MTI-Econews says.
E-Star announced on Sept. 6 that it reached an agreement with its
creditors and cancelled a bankruptcy procedure, MTI-Econews
relates. It filed for bankruptcy protection in December 2012,
MTI-Econews recounts.
E-Star Alternativ Nyrt. is a Hungarian energy company.
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I R E L A N D
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ANGLO IRISH: Former Bank Customers Blast Chapter 15 Bid
-------------------------------------------------------
Law360 reported that bankrupt Irish Bank Resolution Corp Ltd.,
formerly known as Anglo Irish Bank, should not receive Chapter 15
protection because it would protect the bank from a fraud lawsuit
against it, its customers told a Delaware bankruptcy judge on
Sept. 13.
According to the report, the filing says that the bank partook in
a "systematic, organized and comprehensive fraud" against
customers by manipulating the interest rates on loans it issued
to make an extra US$11 million from its borrowers.
The customers said that the bank does not qualify for Chapter 15
protection, the report related.
The case is Flynn et al v. Irish Bank Resolution Corporation et
al., Case No. 1:13-cv-03882 (S.D.N.Y.) before Judge Naomi Reice
Buchwald.
About Anglo Irish
Anglo Irish Bank was an Irish bank headquartered in Dublin from
1964 to 2011. It went into wind-down mode after nationalization
in 2009. In July 2011, Anglo Irish merged with the Irish
Nationwide Building Society, with the new company being named the
Irish Bank Resolution Corporation (IBRC).
Standard & Poor's Ratings Services said that it lowered its long-
and short-term counterparty credit ratings on Irish Bank
Resolution Corp. Ltd. (IBRC) to 'D/D' from 'B-/C'. S&P also
lowered the senior unsecured ratings to 'D' from 'B-'. S&P then
withdrew the counterparty credit ratings, the senior unsecured
ratings, and the preferred stock ratings on IBRC. At the same
time, S&P affirmed its 'BBB+' issue rating on three government-
guaranteed debt issues.
The rating actions follow the Feb. 6, 2013, announcement that the
Irish government has liquidated IBRC.
The former Irish bank sought protection from creditors under
Chapter 15 of the U.S. Bankruptcy Code on Aug. 26, 2013 (Bankr.
D. Del., Case No. 13-12159). The former bank's Foreign
Representatives are Kieran Wallace and Eamonn Richardson. Its
U.S. bankruptcy counsel are Mark D. Collins, Esq., and Jason M.
Madron, Esq., at RICHARDS, LAYTON & FINGER, P.A., in Wilmington,
Delaware.
NOSTRUM MORTGAGES 2003-1: Deal Amendments No Impact on Ratings
--------------------------------------------------------------
Moody's has announced that the proposed action of Nostrum
Mortgages 2003-1 PLC to amend the swap agreement and to post
collateral would not, in and of itself and as of this time result
in the downgrade or withdrawal of the current ratings of the
notes issued by the Issuer.
Moody's opinion addresses only the credit impact associated with
the proposed amendment, and Moody's is not expressing any opinion
as to whether the amendment has, or could have, other non-credit
related effects that may have a detrimental impact on the
interests of note holders and/or counterparties.
Moody's has assessed the proposal to replace Caixa Geral de
Depositos (Ba3) with JP Morgan Securities plc (Aa3/P-1) as swap
counterparty and put in place a credit support annex. The
Proposal does not modify the main economic terms of the swap.
Moody's has made this determination based on, among other things,
the degree of compliance with the Framework for De-Linking Hedge
Counterparty Risks from Global Structured Finance Cashflow
Transactions published in October 2010, along with the current
rating of JP Morgan Securities plc and the current ratings of the
Notes.
Moody's has assessed the probability and impact of a default of
the swap counterparty on the ability of the Issuer to meet its
obligations under the transaction, including the impact of the
loss of any benefit from the swap and any obligation the Issuer
may have to make a termination payment.
Moody's has also assessed the amendments related to the posting
of collateral under the servicer agreement and the fund account
bank agreement respectively.
The principal methodology used in this rating was Moody's
Approach to Rating RMBS Using the MILAN Framework published in
May 2013.
On July 18, 2013, Moody's released a Request for Comment, in
which the rating agency requested market feedback on potential
changes to its request for comment for assessing linkage to swap
counterparties in structured finance cash-flow transactions. If
the revised request for comment is implemented as proposed, the
rating on the notes should not be negatively affected.
Moody's carries these ratings for Nostrum Mortgages 2003-1 PLC:
EUR980M A Notes, Downgraded to Ba2 (sf); previously on Nov 28,
2012 Downgraded to Ba1 (sf) and Remained On Review for Possible
Downgrade
EUR5M B Notes, Downgraded to B3 (sf); previously on Sep 11,
2012
Ba2 (sf) Placed Under Review for Possible Downgrade
EUR15M C Notes, Confirmed at Caa1 (sf); previously on Sep 11,
2012 Caa1 (sf) Placed Under Review for Possible Downgrade
PARIS BAKERY: Faces Winding-Up Order in High Court
--------------------------------------------------
Colm Keena at The Irish Times reports that the popular Paris
Bakery on Dublin's Moore Street faced a winding-up order on
Sept. 13 in the High Court in a dispute with the business's
former accountants.
BMOL Partners, of Herbert Street, Dublin, initiated the petition
to have the company wound up after serving it with a bill for
EUR43,000 in fees, The Irish Times discloses.
However, Ruth Savill, one of the two directors of Paris Bakery
and Pastry, says the company disputes the bill and will be making
its case to the court, The Irish Times notes.
According to The Irish Times, Ms. Savill, a former television
journalist, said the business imports all its flour from France
because the humidity in Ireland makes the wheat unable to produce
flour suitable for baguettes and other types of French bread and
pastries. The owner of the business is its second director,
French baker and chef, Yannick Forel, The Irish Times states.
The latest accounts for the company -- for the year to the end of
April 2012 -- show that total liabilities exceeded total assets
by EUR678,022 at the end of that period, a figure that grew from
EUR237,936 over that financial year, The Irish Times discloses.
Directors' loans to the company increased by EUR640,957 during
the period, to reach EUR1 million by year's end, according to
The Irish Times.
The bakery and restaurant now employs 70 people.
QUOKKA FINANCE: S&P Withdraws 'B-' Rating on Class E Notes
----------------------------------------------------------
Standard & Poor's Ratings Services has withdrawn its credit
ratings on Quokka Finance PLC's class A to E notes.
The withdrawals follow the cash manager's confirmation that all
classes of notes were fully redeemed on the September 2013
interest payment date.
Quokka Finance was a secured-loan commercial mortgage-backed
securities (CMBS) transaction backed by 11 multifamily housing
loans in Germany.
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
Ratings Withdrawn
Quokka Finance PLC
EUR617.5 Million Secured Floating-Rate Notes
A NR A+ (sf)
B NR BBB (sf)
C NR BB+ (sf)
D NR B+ (sf)
E NR B- (sf)
NR-Not rated.
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I T A L Y
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BANCA MONTE: Fitch Lowers Viability Rating to 'ccc'
---------------------------------------------------
Fitch Ratings has affirmed Banca Monte dei Paschi di Siena's
(MPS) Long-term Issuer Default Rating (IDR) at 'BBB', Short-term
IDR at 'F3', Support Rating (SR) at '2' and Support Rating Floor
(SRF) at 'BBB'. The Outlook on the Long-term IDR is Negative. At
the same time Fitch has downgraded MPS's Viability Rating (VR) to
'ccc' from 'b' and removed it from Rating Watch Negative (RWN).
Key Rating Drivers - IDRS, SR, SRF and Senior Debt
MPS's Long-term IDR is at its SRF and therefore based on Fitch's
expectation of support from the Italian authorities. The
affirmations of the IDRs, SR and SRF reflect Fitch's unchanged
view that there is a high probability that MPS would continue to
receive support from the Italian government given its systemic
importance domestically and the amount of government hybrid
capital received to date.
The terms of the EUR4.1 billion government hybrid instruments
issued by the bank include an option for the bank to convert the
instruments into common shares. Fitch believes that the
probability that the Italian government will become a material
shareholder in MPS has increased. The government hybrid capital
is likely to be converted into common shares if the bank does not
raise EUR2.5 billion capital from private investors by end-2014
as requested by the European Commission as part of its agreement
for state aid provided to the bank. The likelihood that the state
could become the bank's major shareholder in the future underpins
Fitch's view of a high probability of continued support for
senior creditors.
The Negative Outlook on MPS's Long-term IDR mirrors the Negative
Outlook on Italy's 'BBB+' Long-term IDR and reflects Fitch's view
that MPS's SRF would likely be revised downward if the Italian
sovereign was downgraded. A downwards revision of the SRF would
result in a downgrade of the bank's Long-term IDR.
Rating Sensitivities - IDRS, SR, SRF and Senior Debt
MPS's IDRs, SR, SRF and senior debt ratings are sensitive to a
change in Fitch's assumptions about the availability of sovereign
support for the bank. A downgrade of Italy's sovereign rating
would likely result in a downward revision of the SRF and
therefore a downgrade of the Long-term IDR as it would indicate
Fitch's view of a decline in the authorities' ability to provide
support.
On September 11, 2013, Fitch outlined its approach to addressing
the topic of support in its bank ratings in light of the evolving
support dynamics for banks worldwide. MPS's SRF and SR would come
under downward pressure if Fitch concluded that support had
weakened or that senior-level support for a failed bank is
possible but can no longer be relied upon. If Fitch considered
that support had declined, factors that would be taken into
consideration in its assessment of the degree of support it would
continue to factor into the ratings would include the amount and
nature of any government ownership in MPS as Fitch believes that
states are likely to want to protect the value of their
investment, at least up to a point.
Fitch currently expects that the Italian authorities will be able
to provide support to MPS, but the European Commission has not
yet granted its final approval for the provision of the state aid
that the bank has already received. MPS's SR and SRF would come
under downward pressure if changes or limitations in the
provision of state aid to MPS increased the risk of reduced
government support to all senior creditors, which Fitch does not
expect.
Any downward revision of MPS's SRF would lead to a downgrade of
the bank's IDRs. In line with Fitch's criteria, the bank's Long-
term IDR is the higher of the VR and the SRF.
Key Rating Drivers - VR
The downgrade of MPS's VR reflects Fitch's view that the
probability that the government will become a large shareholder
in the bank has significantly increased. Fitch would consider the
state becoming a large shareholder of the bank as receipt of
extraordinary support and an indication of its non-viability and
therefore failure without this support. MPS's 'ccc' VR reflects
Fitch's opinion that extraordinary state support has become a
real possibility.
On Sept. 8, 2013, the Italian ministry of finance announced that
the bank's revised restructuring plan, which is due to be
approved by the bank's board on September 24 and presented to the
European Commission in late September, includes a planned EUR2.5
billion capital increase to be completed by end-2014. The
European Commissioner has reportedly stated that if the fresh
capital is not raised in the market, the government hybrid
capital would be converted into common shares. This would mean
that the Italian state would own a significant stake in MPS.
Although the revised restructuring plan has not yet been approved
by MPS's board, which discussed its key points on September 11,
2013, Fitch believes that the increased amount of capital to be
raised and the timeframe for the completion of the capital
increase has raised the likelihood of at least a part-
nationalization of the bank materially.
MPS's VR also reflects MPS's weak profitability and asset
quality. MPS reported a EUR380 million net loss for H113, which
included EUR1 billion loan impairment charges. The bank's revised
restructuring plan will include further measures to reduce
operating expenses. Asset quality deteriorated further in Q213,
and the bank's gross impaired loans/total loans ratio at end-June
2013 was above 18%.
MPS's end-H113 Fitch core capital (FCC) ratio, which excludes
government hybrid capital, was weak at just above 5%. Fitch
eligible capital (FEC), which includes the EUR4.1 billion
government hybrid capital received, was over 10% at end-H113,
which is still low given the high volume of unreserved impaired
loans.
Rating Sensitivities - VR
MPS's VR is primarily sensitive to changes in Fitch's view on the
probability of the bank receiving further extraordinary support,
most likely in the form of the bank's part-nationalization.
The bank's VR would likely be downgraded to 'f' if the bank
received additional government support to avoid a failure. Fitch
would subsequently reassess the bank's VR, taking into
consideration the impact of the support measures, which could
include a conversion of government hybrid capital into common
shares.
The bank's VR would also come under downward pressure if the
prospects for the bank's viability deteriorated further, which
could arise from a further material weakening in asset quality,
or from large losses, which Fitch currently does not expect.
Fitch does not expect an upgrade of the VR before the bank's
planned capital increase in 2014. Any upgrade of the VR would
require successful capital strengthening, excluding capital
received from the state, a stabilization of the bank's
performance and signs that the bank can generate adequate
operating profit and improve asset quality, which Fitch considers
challenging in the current operating environment.
Key Rating Drivers - Subordinated Debt and Other Hybrid
Securities
Subordinated debt and other hybrid capital issued by MPS are all
notched down from MPS's VR in accordance with Fitch's assessment
of each instrument's respective non-performance and relative loss
severity risk profiles, which vary considerably.
The ratings of the bank's Upper Tier 2 and Tier 1 instruments and
preferred securities reflects Fitch's opinion that these notes'
non-performance risk in the form of non-payment of coupon is
high. The receipt of state aid means that if it reports a net
loss, MPS will be obliged not to make coupon payments where the
terms of the instruments allow for non-payment.
Rating Sensitivities - Subordinated Debt and Other Hybrid
Securities
The ratings of subordinated debt and other hybrid capital issued
by MPS are sensitive to changes in Fitch's assumptions on the
probability and severity of non-performance of these notes.
The rating actions are:
-- Long-term IDR: affirmed at 'BBB'; Outlook Negative
-- Short-term IDR: affirmed at 'F3'
-- VR: downgraded to 'ccc' from 'b'; off RWN
-- Support Rating: affirmed at '2'
-- Support Rating Floor: affirmed at 'BBB'
-- Debt issuance program (senior debt): affirmed at 'BBB'
-- Senior unsecured debt, including guaranteed notes: affirmed
at 'BBB'
-- Lower Tier 2 subordinated debt: downgraded to 'CC' from 'B-';
off RWN
-- Upper Tier 2 subordinated debt: downgraded to 'C' from 'CCC'
-- Preferred stock and Tier 1 notes: downgraded to 'C' from 'CC'
MANUTENCOOP FACILITY: S&P Assigns 'B+' CCR; Outlook Stable
-----------------------------------------------------------
Standard & Poor's Ratings Services said that it has assigned its
'B+' long-term corporate credit rating to Italy-based facility
services provider Manutencoop Facility Management SpA (MFM). The
outlook is stable.
At the same time, S&P assigned its 'B+' issue rating to MFM's
EUR425 million senior secured notes. The recovery rating on the
notes is '3', indicating S&P's expectation of meaningful (50%-
70%) recovery for lenders in the event of a payment default.
The rating on MFM reflects S&P's assessment of the company's
financial risk profile as "highly leveraged" and business risk
profile as "fair," as S&P's criteria defines these terms.
Because of the company's cooperative ownership and moderate
financial policy, the rating is one notch above S&P's matrix
guidance.
MFM has weaker geographic diversity than larger international
facility management companies. It has operations only in Italy,
and its business is sensitive to Italy's continued depressed
economic environment. Furthermore, the Italian facility service
market is highly fragmented and competitive. MFM has high
working capital needs owing to the delay in payments from public
administration, which is a common industry feature in Italy.
Nonetheless, MFM has a leading position in the Italian facility
service market, and good visibility of future revenues due to its
long-term contracts, especially with public sector clients.
Additionally, S&P's business risk profile assessment is supported
by MFM's diverse product offering, and higher EBITDA margins than
industry peers, given its presence in the higher margin
laundering and sterilization segment, which has posted an EBITDA
margin above 24% for the past three years. MFM's operating
efficiency benefits from a flexible cost base; it is exposed to
wage cost inflation, but this can be passed on to customers,
albeit with a time lag.
S&P assess the company's management and governance as "fair,"
reflecting its experienced management team and cooperative
controlling ownership.
Under S&P's base-case scenario, it expects MFM's revenues and
margins in 2013 to remain flat -- we think that new contract wins
will offset the likely price discounts linked to the Italian
public administration's planned spending cuts. S&P estimates
that by the end of 2013, the company's Standard & Poor's-adjusted
ratio of debt to EBITDA will be slightly more than 6x, and that
its ratio of funds from operations (FFO) to debt will be slightly
above 9%. S&P further expects the group to post free operating
cash flow (FOCF) in the range of EUR10 million-EUR15 million --
despite no forecast improvement in working capital -- which S&P
views as a support for the rating. S&P expects MFM's financial
policy to remain moderate -- the company is 72% owned by a
cooperative, with the remaining stake being held by different
private equity funds.
The stable outlook reflects S&P's expectation that MFM's
operational performance will be resilient to the difficult
economic environment in Italy, and that its credit metrics will
remain broadly unchanged in 2013 and 2014. That's because
revenue additions coming from new signed contracts should offset
likely price discounts linked to spending cuts to be implemented
in Italian public administration. S&P expects MFM's EBITDA
margin to stay between 9% and 10% in 2013 and 2014, and revenue
growth to not exceed the inflation rate in the same period. S&P
is also assuming that working capital will not require additional
debt financing in the next couple of years.
S&P could take a positive rating action if MFM's credit metrics
improved to levels it views as commensurate with an "aggressive"
financial risk profile over a sustained period. This could occur
if MFM was able to deleverage at a faster rate than S&P is
assuming under its base-case scenario, due to better
profitability or improved working capital management. An upgrade
would also depend on MFM maintaining its adequate liquidity and
moderate financial policy.
S&P might consider a negative rating action if the company's
profitability became significantly weaker than it currently
anticipates, mainly owing to a worsening operating environment in
the Italian facility management market or withdrawal of contracts
with large clients. Downside rating pressure could also arise if
the company took a more aggressive stance on financial leverage
than S&P currently anticipates. This could, for example, stem
from significantly increased debt to finance working capital or
significant debt-funded acquisitions. S&P sees this scenario as
unlikely, however.
RIVA GROUP: Future Rests in Government Hands After Asset Seizure
----------------------------------------------------------------
Giulia Segreti at The Financial Times reports that the future of
Italy's Riva Group, one of Europe's largest steelmakers, rests in
the hands of the government and the judiciary after production
was halted after a court order freezing the assets of the Riva
family.
The family-owned group was forced to stop its steel making and
logistics activities after a judge last Monday ordered an asset
freeze in a widening environmental probe involving Ilva, the
group's biggest company, the FT relates. Ilva, bought by Riva in
1995, was allowed to continue production since it is already
under special government administration since June, the FT notes.
Ilva, which employs 12,000 workers and produces 10m tonnes of
steel a year, was partially closed and seized by the courts last
year in a long-running case over alleged fatal violations of
environmental standards at the southern port city of Taranto, the
FT discloses.
According to the FT, the Riva Group has denied all allegations,
and said it has invested EUR1.5 billion up to 2011 to fulfill
environmental standards.
Italy's government is now being pushed into finding a quick
solution for Riva's 13 privately-owned companies, which employ
1,400 workers and produce 7m tonnes of steel a year, mostly in
northern Italy, the FT says.
Flavio Zanonato, Italy's development minister, was set to meet
representatives from Riva on Sept. 16, in a first effort to
resolve what the national business association said was a
"dramatic blow", the FT discloses. Protests are also expected at
all of the affected plants, the FT states.
Special state administration under a government-appointed
commissioner or emergency measures to allow production to
continue at the affected plants are the two main options being
considered by the government.
The fate of Riva also rests on the result of an appeal made by
the Riva family and on the main trial, which is still only at a
preliminary phase, according to the FT. Emilio Riva, the group's
founder, was arrested with his son Nicola last July but both are
now only under movement restriction orders, the FT discloses.
===================
L U X E M B O U R G
===================
EUROMAX III: Fitch Affirms 'CC' Rating on Class B Notes
-------------------------------------------------------
Fitch Ratings has affirmed Euromax III MBS Ltd's notes, as
follows:
Class A-1 (XS0158773324): affirmed at 'B-sf'; Outlook Negative
Class A-2 (XS0158774991): affirmed at 'CCCsf'
Class B (XS0158775022): affirmed at 'CCsf'
Key Rating Drivers
The affirmation reflects the increase in the notes' available
credit enhancement (CE) due to the deleveraging of the underlying
portfolio. CE for the class A-1 notes has increased to 39.7% from
38.9% as of the previous annual review in October 2012, for the
class A-2 notes to 32.7% from 32.2% and for class B notes to
18.9% from 18.7%.
Over the past year, the underlying portfolio has experienced a
negative migration towards 'CCCsf' and below assets. Assets rated
'CCCsf' or below have increased since September 2012 to 39% from
34.5% of the outstanding portfolio balance and the notional of
assets rated 'Csf' has increased to 16.8% from 12%. Most of the
lowest rated assets in the portfolio are German CMBS and RMBS
assets.
The portfolio is mainly concentrated in RMBS and CMBS assets,
which represent 67.6% and 26.4% of the balance, respectively, and
residually in SF CDO. The vast majority of the assets are
mezzanine with original tranche thickness below 10%.
The over-collateralization test failed for the first time in
February 2013 and has not come back into compliance since.
Consequently any excess spread is being used to repay the notes
sequentially subject to the priority of payments.
Additionally, if the notes remain outstanding by their expected
maturity in December 2014, the transaction structure features a
coupon step-up for the class A-1, A-2 and B notes. Fitch believes
that this step up combined with low available weighted average
spread from the portfolio could lead to a higher probability of
event of default for the classes A-1 and A-2. Consequently, the
Outlook for the A-1 note remains Negative.
Deferral of interest is not an event of default for class B
notes, whereas it is for classes A-1 and A-2.
Euromax III MBS Ltd (the issuer) is a cash arbitrage
securitization of structured finance assets.
Rating Sensitivities
Fitch tested the impact on the ratings of bringing the maturity
of the assets in the portfolio to their legal maturity, and this
stress would not affect the rating of the notes.
=====================
N E T H E R L A N D S
=====================
NORTHERN LIGHTS: Moody's Cuts Rating on US$150MM Notes to 'B1'
--------------------------------------------------------------
Moody's Investors Service has downgraded the rating of the
following notes issued by Northern Lights Bulgaria B.V.:
$150,000,000 Loan Participation Notes due 2014 Series 2012-1,
Downgraded to B1; previously on Oct 3, 2012 Definitive Rating
Assigned Ba3
This transaction represents the repackaging of $150M facility
agreement to Corporate Commercial Bank AD. Payments received by
the Issuer under the Facility Agreement will be used to make
payments due under the Notes.
Ratings Rationale:
Moody's explained that the rating action is the result of the
rating downgrade to B1 from Ba3 of Corporate Commercial Bank AD.
Given the pass through nature of the transaction, holders of the
notes will be fully exposed to the credit risk of Corporate
Commercial Bank.
The principal methodology used in this rating was Moody's
Approach to Rating Repackaged Securities published in April 2010.
No cash flow, sensitivity analysis or stress scenarios have been
conducted as the rating was directly derived from the rating of
Corporate Commercial Bank.
=============
R O M A N I A
=============
AVERSA: New Owner No Plan to Change Management Structure Yet
------------------------------------------------------------
Adrian Cojocar at Ziarul Financiar reports that Canadian
businessman Michael Topolinski, who recently bought bankrupt pump
maker Aversa, says he does not plan to change the plant's
management structure yet.
As reported by the Troubled Company Reporter-Europe on Sept. 16,
2013, Ziarul Financiar related that Mr. Topolinski was assisted
in the transaction by law firm Biris Goran.
Aversa is based in Romania.
=========
S P A I N
=========
CODERE SA: ISDA to Issue Default Swaps Ruling on Bond Payment
-------------------------------------------------------------
Abigail Moses and Katie Linsell at Bloomberg News report that the
International Swaps and Derivatives Association said it will rule
whether Codere SA's delayed bond payment has triggered credit-
default swaps on the same day the Spanish gaming company honors
its commitments.
"If ISDA says it's a default, I throw my hands up," Bloomberg
quotes Aengus McMahon, a credit analyst at ING Groep NV in
London, as saying. "It's not intuitive that there's no default
on the underlying instrument and CDS gets triggered anyway."
Codere said Sept. 13 it would pay a coupon on US$300 million of
9.25% bonds yesterday, Sept. 17, two days after the end of a
30-day grace period, as it negotiated with lenders to refinance
the business, Bloomberg relates.
It changed the terms of a EUR99 million (US$132 million) loan
from private-equity firms Canyon Partners LLC and Blackstone
Group LP's GSO Capital Partners that would have blocked the
coupon by also requiring the facility to be repaid, Bloomberg
discloses.
According to Bloomberg, the delayed payment allows buyers to
claim compensation on a net US$444 million of debt. ISDA said
yesterday that its determination committee of dealers and
investors will consider whether there has been a failure-to-pay
credit event, Bloomberg notes.
Codere SA is a Spain-based company engaged, together with its
subsidiaries, in the operation of activities related to the
private gaming sector, principally in the operation of arcade and
slot machines, sports betting houses, bingo halls, casinos and
racetracks. The Company has presence in Spain, Italy, Argentina,
Brazil, Colombia, Mexico, Panama and Uruguay.
* * *
As reported by the Troubled Company Reporter-Europe on Aug. 22,
2013, Standard & Poor's Ratings Services said it had lowered to
'SD' from 'CC' its long-term corporate credit rating on Spain-
based gaming company Codere S.A.
EMPRESAS HIPOTECARIO: S&P Lowers Rating on Class B Notes to 'D'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered to 'D (sf)' from
'CCC- sf)' its credit rating on EMPRESAS HIPOTECARIO TDA CAM 5,
Fondo de Titulizacion de Activos' class B notes.
The downgrade follows the class B notes' interest payment default
on the Aug. 26, 2013 interest payment date (IPD).
The class B notes have breached the transaction's documented
interest deferral trigger. The reserve fund, which was used on
several IPDs to provision for defaulted assets and pay interest
on the notes, was fully depleted in May 2012. S&P's rating on
the class B notes addresses timely payment of interest and
ultimate payment of principal.
The trustee data for the August 2013 IPD shows that cumulative
defaults account for 10.78% of the closing portfolio balance,
which is above the 10.40% trigger for the class B notes. The
class B notes defaulted on their August 2013 interest payment
following the breach of the interest deferral trigger. S&P has
therefore lowered to 'D (sf)' from 'CCC- (sf)' its rating on the
class B notes.
EMPRESAS HIPOTECARIO TDA CAM 5 is a 2007-vintage securitization
of mortgage-backed loans granted to Spanish small and midsize
enterprises (SMEs). Banco CAM S.A.U., formerly Caja de Ahorros
del Mediterraneo (CAM), and which was acquired by Banco de
Sabadell, S.A. originated the loans. Banco de Sabadell services
the loans.
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
PESCANOVA SA: Cartersian Mulls Legal Action v. BDO Over Audit
-------------------------------------------------------------
Miles Johnson at The Financial Times reports that Cartesian
Capital is preparing legal action against BDO over its auditing
of Spain's Pescanova, as the fallout continues from the scandal-
hit frozen fish company's revelation of EUR3.6 billion of debts.
New York-based Cartesian, which holds 5% of Pescanova and is its
largest foreign institutional investor, said it had instructed
its lawyers to launch legal action against BDO's Spanish arm
within the next month, the FT relates.
"If you look at scale, length of fraud, and profile of Pescanova
as a company, it is hard to understand how the auditor did not
see something was wrong," the FT quotes said Peter Yu, managing
partner of Cartesian, as saying.
"We are not talking about EUR30 million here but more than
EUR3 billion -- it is hard to see how an independent auditor
doing its job correctly could let this happen".
Pescanova, a household name in Spain, stunned the business world
by failing to present its accounts for 2012, with investigators
later revealing it held as much as EUR3.6 billion of debts, more
than four times what it had declared to the market, the FT
discloses.
Its shares were later suspended by Spain's market regulator,
leaving investors probably facing a complete loss on their
holdings, the FT recounts.
An investigation into Pescanova's bankruptcy by KPMG earlier this
year and seen by the FT concluded that BDO had been provided with
misleading information by the company's former chairman, Manuel
Fernandez de Sousa.
Mr. Fernandez de Sousa, who holds 7.5% of Pescanova and whose
father founded the company, has denied any wrongdoing, the FT
notes. He is facing both criminal and civil charges for his role
in Pescanova's failure to declare the full extent of its debts,
and has been ordered to give guarantees in anticipation of legal
action by investors and lenders, the FT discloses.
Pescanova is a Galicia-based fishing company. The company
catches, processes, and packages fish on factory ships. It is
one of the world's largest fishing groups.
Pescanova filed for insolvency on April 15, 2013, on at least
EUR1.5 billion (US$2 billion) of debt run up to fuel expansion
before economic crisis hit its earnings. The Pontevedra
mercantile court in northwestern Galicia accepted Pescanova's
insolvency petition on April 25. The court ordered the board of
directors to step down and proposed Deloitte as the firm's
administrator.
RURAL HIPOTECARIO XV: Fitch Corrects July 19 Ratings Release
------------------------------------------------------------
This announcement corrects the version published on July 19,
2013, which incorrectly stated some ratios of the mortgage pool.
Fitch Ratings has assigned Rural Hipotecario XV F.T.A.'s
mortgage-backed floating-rate notes due May 2058 final ratings,
as follows:
EUR476,100,000 class A notes 'Asf'; Outlook Negative
EUR52,900,000 class B notes: 'CCCsf'; Recovery Estimate of 90%
The transaction is a multi-originator securitization of a EUR529
million static pool of Spanish residential mortgage loans,
originated and serviced by Caja Rural de Asturias, Caja Rural de
Granada, and Caja Rural de Albacete, Ciudad Real y Cuenca (the
originators, unrated). The final ratings address timely payment
of interest and ultimate payment of principal on the class A
notes, and ultimate payment of interest and principal on the
class B notes by the legal final maturity date of the notes in
May 2058.
Key Rating Drivers
In deriving the lifetime default rate of the securitized
portfolio under a base case scenario, Fitch has adjusted the
observed default rates upwards by a factor of 1.3x. "This
adjustment captures our opinion that the actual roll rates into
default are unsustainable and cannot be relied on. Fitch received
historical cumulative arrears data covering 2004 to 2012 from the
originators based on their past RMBS securitizations," Fitch
says.
Fitch believes the securitized portfolio has prime
characteristics with 100% first lien positions, all residential
mortgage loans with a moderate weighted average (WA) OLTV of
66.5%, and an indexed WA CLTV of 69.8% estimated by the agency
taking into consideration the almost five years of seasoning. The
pool is mainly concentrated in three regions Andalucia (33.0%),
Asturias (27.8%) and Castilla La Mancha (34.2%).
Fitch believes that servicer disruption risk, caused by the
default of one servicer, is adequately mitigated by the
incorporation of purpose specific liquidity reserves and the
appointment of a cold back-up servicer, Banco Cooperativo Espanol
(BCE, BBB/Negative/F3). BCE provides the Spanish Credit
Cooperative Group with a common range of services and uses the
same IT systems.
Fitch has incorporated potential stresses derived from basis and
reset risks into the cash flow analysis, as the structure is
unhedged. The notes are referenced to three-month EURIBOR with
quarterly resets, while most loans are referenced to 12-month
EURIBOR with annual, bi-annual and quarterly resets.
In analyzing recovery timing, as a consequence of the recently
approved Decree Law 6/2013 in Andalucia, Fitch has increased the
recovery timing in this region by up to a maximum of three years
for first homes. Additionally, Fitch believes that the structure
adequately mitigates the risk of recovery cash flows being
obtained after the legal maturity of the notes, as there is a
difference of 6.5 years between the final scheduled maturity date
of the loans and that of the notes.
Rating Sensitivities
Fitch believes the key risks that that could introduce volatility
to the ratings are home price declines beyond expectations, as
these could limit recoveries, and a change of the current legal
framework materially, weakening the full recourse nature of the
Spanish mortgage market, as this scenario could change borrower
payment behaviour. The Negative Outlook on the notes rated above
'CCCsf' reflects the uncertainty associated with changes to the
mortgage enforcement framework.
Fitch's expectation under a 'Bsf' stress scenario is linked to a
WA lifetime loss rate of 4.4%, which results from a WA
foreclosure frequency assumption of 7.8% and a WA recovery rate
expectation of 43.6%. The assumed WA loss rate in an 'A' rating
scenario is of 11.9%.
RURAL HIPOTECARIO XIV: Fitch Corrects July 16 Ratings Release
-------------------------------------------------------------
This announcement corrects the version published on July 16,
2013, which incorrectly stated some ratios of the mortgage pool.
Fitch Ratings has assigned Rural Hipotecario XIV F.T.A.'s
mortgage-backed floating-rate notes due May 2055 final ratings,
as follows:
EUR202,500,000 class A notes 'Asf'; Outlook Negative
EUR22,500,000 class B notes: 'Bsf'; Outlook Negative
The transaction is a securitization of a EUR225 million static
pool of Spanish residential mortgage loans, originated and
serviced by Bantierra (the originator, unrated). This is the
first standalone securitization of mortgage loans originated by
Bantierra, while the originator has participated in various
multi-seller RMBS transactions in the past eight years. The
ratings address timely payment of interest and ultimate payment
of principal on the class A notes, and ultimate payment of
interest and principal on the class B notes by the legal final
maturity date of the notes in May 2055.
Key Rating Drivers
In deriving the lifetime default rate of the securitized
portfolio under a base case scenario, Fitch has adjusted upwards
the observed default rates by a factor of 1.1x. "This upward
adjustment captures our opinion that the historical default rates
do not entirely reflect the risk attributes of the securitized
pool which is linked to younger vintages 2009 to 2012. Fitch
received historic cumulative arrears data covering 2004 to 2008
from Bantierra based on its past RMBS securitization
transactions," Fitch says.
The underlying assets are judged to be of prime quality as all
positions are first-lien residential mortgage loans, with a
moderate weighted average (WA) OLTV of 69.2%. The WA indexed CLTV
derived by the agency is of 74.9%, which captures a WA loan
seasoning of 59 months. Fitch believes one key risk attribute of
this portfolio is its high geographical concentration in the
region of Aragon, and consequently has incorporated into its
analysis a probability of default hit of 1.15x for these loans.
Fitch believes that servicer disruption risk, caused by the
default of the collateral servicer, is adequately mitigated by
the incorporation of purpose-specific liquidity reserves and the
appointment of a cold back up servicer, Banco Cooperativo Espanol
S.A. (BCE, 'BBB'/Negative/'F3'). BCE provides the Spanish Credit
Cooperative Group with a common range of services and uses the
same IT systems.
Fitch has accommodated within its cash flow analysis potential
stresses derived from basis and reset risks, as the structure is
unhedged. The notes are referenced to three- month EURIBOR with
quarterly resets, while most loans are referenced to 12-month
EURIBOR with annual or bi-annual resets. In the agency's view,
structural credit enhancement for the class A notes (15%) and for
the class B notes (5%) is sufficient to adequately mitigate these
risks at the relevant stress scenario.
Rating Sensitivities
Fitch believes the key risks that that can introduce volatility
to the ratings are house price declines beyond Fitch's
expectations, as these could limit recoveries, and a change of
the current legal framework materially weakening the full
recourse nature of the Spanish mortgage market as such scenario
could change borrower payment behavior. The Negative Outlook on
the notes reflects the uncertainty associated with changes to the
mortgage enforcement framework, which could affect borrower
payment behavior and recovery timing.
Fitch's expectation under a 'Bsf' rating scenario is linked to a
WA lifetime loss rate of 4.2%, which results from a WA
foreclosure frequency assumption (WAFF) of 7.3% and a WA recovery
rate (WARR) expectation of 42.1%. The assumed WA loss rate in an
'A' rating scenario is of 11.4%.
RURAL HIPOTECARIO XVI: Fitch Corrects July 19 Ratings Release
-------------------------------------------------------------
This announcement corrects the version published on July 19,
2013, which incorrectly stated some ratios of the mortgage pool.
Fitch Ratings has assigned Rural Hipotecario XVI F.T.A.'s
mortgage-backed floating-rate notes due April 2055 final ratings,
as follows:
EUR133,500,000 class A notes 'Asf'; Outlook Negative
EUR16,500,000 class B notes: 'CCCsf'; Recovery Estimate of 90%
The transaction is a multi-originator securitization of a EUR150
million static pool of Spanish residential mortgage loans,
originated and serviced by Caja Rural de Soria, Caja Rural de
Teruel, and Caja Rural de Zamora (the originators, unrated). The
final ratings address timely payment of interest and ultimate
payment of principal on the class A notes, and ultimate payment
of interest and principal on the class B notes by the legal final
maturity date of the notes in April 2055.
Key Rating Drivers
In deriving the lifetime default rate of the securitized
portfolio under a base case scenario, Fitch has adjusted upwards
the observed default rates by a factor of 1.1x. "This upward
adjustment captures our opinion that the historical default rates
do not entirely reflect the risk attributes of the securitized
pool, which is linked to younger vintages (2009 to 2012). Fitch
received historical cumulative arrears data covering 2004 to 2012
from the originators based on their past RMBS securitization
transactions," Fitch says.
Fitch believes the securitized portfolio has prime
characteristics with 100% first-lien positions, all residential
mortgage loans with a moderate weighted average (WA) OLTV of
72.6%, and an indexed (WA) CLTV of 77.5% estimated by the agency
taking into consideration the almost 4.5 years of seasoning.
Fitch believes a key risk attribute of the portfolio is its high
geographical concentration in the two regions of Castilla Leon
(55.9%) and Aragon (33.5%), and has consequently incorporated
into its analysis a probability of default hit of 1.15x for these
loans.
Fitch believes that servicer disruption risk, caused by the
default of one servicer, is adequately mitigated by the
incorporation of purpose-specific liquidity reserves and the
appointment of a cold back up servicer, Banco Cooperativo Espanol
(BCE; BBB/Negative/F3). BCE provides the Spanish Credit
Cooperative Group with a common range of services and uses the
same IT systems.
Fitch has incorporated potential stresses derived from basis and
reset risks within the cash flow analysis, as the structure is
unhedged. The notes are referenced to EURIBOR with quarterly
resets, while most loans are referenced to 12-month EURIBOR with
annual, bi-annual and quarterly resets.
Rating Sensitivities
Fitch believes the key risks that could introduce volatility to
the ratings are home price declines beyond Fitch's expectations,
as these could limit recoveries, and a material change in the
current legal framework, weakening the full recourse nature of
the Spanish mortgage market, as this scenario could change
borrower payment behavior. The Negative Outlook on the class A
notes reflects the uncertainty associated with changes to the
mortgage enforcement framework.
Fitch's expectation under a 'Bsf' stress scenario is linked to a
weighted average (WA) lifetime loss rate of 4.7%, which results
from a WA foreclosure frequency assumption of 8.0% and a WA
recovery rate expectation of 41.4%. The assumed WA loss rate in a
'A' rating scenario is 12.6%.
=============
U K R A I N E
=============
INTERPIPE LIMITED: Fitch Lowers LT Issuer Default Rating to 'CCC'
-----------------------------------------------------------------
Fitch Ratings has downgraded Ukrainian-based Interpipe Limited's
Long-term Issuer Default Rating (IDR) and senior secured rating
(applicable to the company's 2017 Eurobonds) to 'CCC' from 'B-'.
The bond's Recovery Rating is 'RR4'.
The rating action reflects the operational and financial
uncertainty created by two current trade matters involving the
export of pipes to the Customs Union involving Russia, Kazakstan
and Belarus -- Interpipe's largest pipe export market accounting
for approximately 25% of total pipe sales in 2012 -- and the US
respectively. The Customs Union matter relates to the non-renewal
of the previous quota for Ukrainian pipe imports for H213.
Russian Prime Minister Dmitry Medvedev indicated in July 2013
that the quota would not be extended. Exports above the quota are
subject to a customs duty of at least 19% customs duty, making
sales into Russia only marginally profitable. Interpipe requested
a reduction in applicable customs duties in April 2013.
Should customs duties be reduced or the quota reinstated for H2
2013 and Interpipe resumes full shipments then it is possible
that the company may be able to meet its scheduled debt repayment
of US$106 million due in early November 2013. If not, then a new
round of restructuring talks with its lenders would seem
inevitable.
Key Rating Drivers
- Debt Repayments/Liquidity
Mandatory debt repayments under the 2011 restructuring agreement
total US$206 million in 2013, and then ratchet up to US$307
million in 2014. Under Fitch's previous base rating case the
repayments due in 2013 appeared manageable with half paid in May,
and the remainder expected to be met from a combination of free
cash flow (FCF) generation and balance sheet cash. Fitch
understands that Interpipe is currently experiencing liquidity
constraints due to the Customs Unionn situation and that
discussions with lenders regarding an increase in permitted
working capital limits have been placed on hold.
- Forecast Financial Performance
Pipe sales to the Customs Union have historically represented
around 25%-30% of Interpipe's overall pipe segment volumes. The
impact of the non-extension of the quota would be mitigated by
sales of pipes to other regions and sales from the wheels
segment. However as Fitch has commented previously, Interpipe's
debt repayment profile allows limited scope for underperformance.
Fitch had previously expected Interpipe to achieve EBITDAR in
2013 in the range of US$340 million-US$360 million, rising to
around US$440 million in 2014 as the electric arc furnace (EAF)
achieves full production.
- US Anti-Dumping Case
The US Commerce Department is currently conducting an "anti-
dumping" investigation into the import of Oil Country Tubular
Goods (OCTG) pipes into the US market. Ukraine is one of nine
countries being targeted by the investigation. Whilst Ukraine is
not amongst the countries for whom the highest duties are being
sought, the potential imposition of duties from 2014 would
nevertheless represent an additional hurdle in the company
meeting its scheduled debt repayments.
- Restructuring Agreement
The restructuring agreements provide for a retranching of bank
debt. The US$200 million Eurobonds have been extended to August
2017, after the final maturity of the bank debt. All bank debt
holders and bondholders benefit from a general security package
including guarantees/sureties from key operating/trading
subsidiaries, and pledges of shares, major PPE items, intra-group
receivables, and a portion of inventory and off-take agreements.
Lenders under the SACE facility benefit from various first-
ranking pledges including over the equipment and shares of Steel
One, which owns the EAF. EAF noteholders have a second-ranking
pledge with other bank debt/bondholders having a third-ranking
pledge.
- EAF Commissioning
After a 12 month delay minimum performance levels for the
company's new EAF were achieved in H113 with full output expected
from the start of 2014. The EAF resolves the company's key
historical operational weakness, its lack of internal self-
sufficiency in steel billets. Once the EAF is in full production
Interpipe will be largely self-sufficient in billets, but will
continue to externally purchase around 200,000 tonnes of hot
rolled coil for welded steel-pipe production.
Rating Sensitivities
Positive: Future developments that could lead to positive rating
actions include:
-- Positive rating action is not currently expected.
Negative: Future developments that could lead to negative rating
action include:
-- Should the customs duties not be reduced or the Customs Union
quota reinstated then Interpipe is unlikely to be able to
meet
its scheduled debt repayments in November. This scenario
would
likely see the company's ratings downgraded to 'C'.
===========================
U N I T E D K I N G D O M
===========================
CO-OPERATIVE BANK: Hedge Funds Propose Debt-for-Equity Swap
-----------------------------------------------------------
Philip Aldrick at The Telegraph reports that a group of rebel
hedge fund investors in the struggling Co-operative Bank has
demanded the mutual tear up its complex GBP1.5 billion rescue
plan and replace it with a simple debt-for-equity swap.
According to The Telegraph, rejecting claims that there was "no
plan B", the hedge funds submitted a proposal to the bank's board
that would cut its parent, the Co-operative Group, out of the
rescue altogether and leave bondholders as the sole owners of the
stricken lender.
The hedge funds, who speak for about GBP400 million of the Co-op
Bank's subordinated debt, or "43%% of the lower tier 2 bonds",
have asked the mutual to "engage in immediate and substantive
discussions" on the proposal, The Telegraph discloses.
The Co-op Bank has been ordered to raise GBP1.5 billion of new
capital by the regulator or risk being put into "resolution", a
form of administration that could wipe out bondholders, The
Telegraph says. The bank is on its last legs after poor lending
in the past left it nursing a GBP709 million loss in the first
half of the year, The Telegraph notes.
The Co-op Group's plan would see the broader mutual inject GBP500
million of capital into the lender, sell the group's GBP500
million of insurance assets, and force GBP500 million of losses
on the GBP1.3 billion of subordinated bondholders, The Telegraph
states. It would then be floated on the stock exchange,
partially undermining its "mutual" model of customer ownership,
according to The Telegraph.
The hedge funds' alternative proposal is to convert all
subordinated bondholders into equity, effectively creating
GBP1.3 billion of new capital, and to invest another GBP200
million themselves or from a third party "subject to due
diligence", The Telegraph discloses.
Insiders said the hedge funds' proposal was an attempt to force
the Co-op into discussions before the details of its own plan are
released next month, The Telegraph notes.
The bondholder group, as cited by The Telegraph, said: "In the
nearly three months since it announced it must raise GBP1.5
billion, the bank has not provided any meaningful detail of the
terms on which it proposes to restructure the bonds, has failed
to engage meaningfully, and has stated incorrectly that it's yet-
to-be-announced exchange offer is the only option."
The funds may struggle to secure the backing of the other
bondholders, however, The Telegraph says. According to The
Telegraph, a small but vocal pressure group of pensioners has
made it clear they will reject any proposal that will cost them
the income on their bonds. Both current proposals would see
their income cut, The Telegraph states.
A third group of institutional investors may also have
restrictions on holding equity that could deter them from the
hedge funds' deal, The Telegraph says.
The funds, who collectively manage GBP60 billion of assets, are
being advised by financial advisors Moelis and lawyers Shearman &
Sterling, The Telegraph discloses.
According to The Financial Times' Sharlene Goff, the Co-op on
Monday said it had considered all options, including structures
that were similar to those outlined by Moelis. "We are uncertain
of the structure, deliverability and conditionality of what is
proposed by Moelis, but we are willing to engage with them to
investigate further," the FT quotes Co-op as saying.
The FT relates that the Moelis consortium said the "inherent
conflict of interest" between the parent Co-op Group and the
banking arm had prevented "substantive engagement".
Co-op Bank -- part of the mutually owned food-to-funerals
conglomerate Co-operative Group -- traces its history back to
1872. The bank gained prominence for specializing in ethical
investment. It refuses to lend to companies that test their
products on animals, and its headquarters in Manchester is
powered by rapeseed oil grown on Co-operative Group farms.
Founded in 1863, the Co-op Group has more than six million
members, employs more than 100,000 people, and has turnover of
more than GBP13 billion.
* * *
As reported by the Troubled Company Reporter-Europe on May 13,
2013, Moody's Investors Service downgraded the deposit and senior
debt ratings of Co-operative Bank plc to Ba3/Not Prime from
A3/Prime 2, following its lowering of the bank's baseline credit
assessment (BCA) to b1 from baa1. The equivalent standalone bank
financial strength rating (BFSR) is now E+ from C- previously.
ECO-BAT TECHNOLOGIES: Moody's Cuts CFR to B1; Outlook Stable
------------------------------------------------------------
Moody's Investors Service has downgraded to B1 from Ba3 the
corporate family rating of Eco-Bat Technologies Ltd., the lead
producer headquartered in the UK. Concurrently, the rating agency
has downgraded the probability of default rating to B1-PD from
Ba3-PD and the rating on the EUR300 million of senior notes
issued by Eco-Bat Finance plc and due in 2017 to B2 from B1. The
outlook on the ratings is stable.
Ratings Rationale:
The downgrade reflects Moody's expectation that Eco-Bat's
profitability will weaken further in 2013 from its levels in
2012. Eco-Bat's EBITDA margin, as reported by the company,
remained under pressure in the first half of 2013 declining to
5.7% from 8.5% in the full year 2012. Reported EBITDA decreased
to GBP45 million in the first half of 2013 from GBP73 million in
the prior year period. Although Eco-Bat managed to recover some
of the lost volumes (down 10% in the first half compared to prior
year) following the discontinuation of certain contracts with its
key customer Johnson Controls, Inc. (Baa1, stable), the decline
in EBITDA was significant and driven by an increase of lower
margin spot sales that now comprise 16% of total sales in the
first six months of 2013 compared to 8% in the prior year period.
Lower silver volumes, a side product of Eco-Bat's lead operations
that accounted for around GBP249 million of sales in 2012, and
the decline in silver prices in the first half of 2013 also
contribute to Moody's expectation of weaker operating performance
for the year.
In addition, the large pay-in-kind (PIK) note at the holding
company of Eco-Bat outside the restricted group of the EUR300
million senior notes continues to approach its maturity date in
March 2017, a few days after the maturity of the senior notes,
while accreting non-cash interest towards its EUR1.8 billion
final claim at maturity. In combination with significant capacity
to pay dividends under the notes covenants, around GBP400 million
as of June 2013, and additional flexibility to incur debt, event
risk continually increases as the PIK approaches its maturity
date despite having no direct claim into the restricted group.
Moody's notes that certain outcomes at the shareholder level,
including a change of control following a default of the PIK
note, may also affect the restricted group.
Additional uncertainty that weighs on the ratings arises from the
EU Commissions investigation into several lead scrap battery
purchasers, including Eco-Bat, that appears ongoing and some
legal disputes around past supply contracts between Eco-Bat and
its largest customer Johnson Controls, Inc.
Outlook
The stable outlook reflects Eco-Bat's solid liquidity position
that provides some flexibility to weather the challenging
operating environment.
What Can Change The Rating Up/Down
Moody's considers the prospect for near-term upward rating
migration to be limited in the context of the considerations. A
prerequisite for upward rating pressure is improvement in EBITDA
margins on a sustainable basis above 10% and greater certainty
that Eco-Bat's resources will not ultimately be used to support
the PIK note.
Downward rating pressure could arise if Eco-Bat's operating
performance and credit metrics weaken further in 2014 e.g. if
Moody's adjusted EBITDA margins continue to decline. The ratings
will also come under negative pressure as the PIK note continues
to grow over time and approaches maturity; or following the use
of the companies resources to support the PIK note. Any material
debt-funded acquisition could also create downward rating
pressure.
Eco-Bat Technologies Ltd.'s ratings were assigned by evaluating
factors that Moody's considers relevant to the credit profile of
the issuer, such as the company's (i) business risk and
competitive position compared with others within the industry;
(ii) capital structure and financial risk; (iii) projected
performance over the near to intermediate term; and (iv)
management's track record and tolerance for risk. Moody's
compared these attributes against other issuers both within and
outside Eco-Bat Technologies Ltd.'s core industry and believes
Eco-Bat Technologies Ltd.'s ratings are comparable to those of
other issuers with similar credit risk. 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 Matlock, UK, Eco-Bat Technologies Ltd. ("Eco-
Bat" or the "company") is the world's largest producer of lead
based on tons sold. Around 88%% of the company's total lead
output is from secondary lead smelting, which includes the
recycling of spent automotive and industrial lead-acid batteries.
The company is privately held, with 86.7% controlled by its
chairman, Howard Meyers, and his family. For the 12 months to
December 2012, Eco-Bat reported GBP1.7 billion of sales.
HYPERION INSURANCE: Moody's Assigns B2 CFR; B1 Debt Ratings
-----------------------------------------------------------
Moody's Investors Service has assigned a B2 corporate family
rating and B3-PD probability of default rating to Hyperion
Insurance Group Limited. The rating agency has also rated
Hyperion's proposed US$250 million senior secured term loan and
the GBP25 million senior secured revolving credit facility, both
at B1. This refinancing follows the 2012 acquisition of Windsor
Limited (Windsor), initially financed through bank borrowings,
which totaled GBP68 million as at YE 2012, with the remainder of
the proceeds to be used for general corporate purposes and
potentially to fund future acquisitions. The rating outlook for
Hyperion is stable. The ratings are based on draft documentation,
including a draft list of guarantors for the term loan and
revolving credit facility, and are based on the assumption that
final terms will not differ materially from those received to
date.
Ratings Rationale:
Hyperion's ratings reflect the Group's good market position in
its chosen lines of business, its strong geographic
diversification as an insurance intermediary with a global
presence, providing both broking and underwriting services (via
delegated underwriting authority agreements, where Hyperion does
not carry direct insurance risk on its balance sheet), together
with solid net profitability levels. These strengths are tempered
by the recent increases in the group's financial leverage, both
as part of the acquisition of Windsor in 2012 and as a result of
the proposed refinancing, and by EBITDA profitability levels that
remain below similarly rated peers.
Based on Moody's estimates, Hyperion's debt-to-EBITDA ratio will
be in the range of 7.5x-8x (pro-forma 2012 figures albeit the
acquisition of Windsor is only consolidated for part of 2012)
following the proposed financing, assuming the Group's liquidity
option is treated as a financial obligation of the group. Such
leverage is high for the rating category, but it is considered
temporary, with Hyperion's leverage expected to improve in the
near-to-medium term to levels below 6x, on a Moody's adjusted
basis. The liquidity option, put in place as part of the
consideration payable to Windsor's shareholders, is repayable in
cash in 2022 to holders (at their option) in the event of
Hyperion not conducting an IPO before September 27, 2017. If the
liquidity option liability is discounted to some extent, given
uncertainty around the likelihood of future cash outflows from
the Group resulting from this option, leverage metrics are more
favorable, with the 2012 pro-forma figure approximately 6.5x
excluding the liquidity option.
"Hyperion's ratings incorporate our assumption that the company's
financial flexibility metrics will improve gradually and that the
Group will use most of the balance of proceeds from the proposed
refinancing (after repayment of the bank borrowings) to grow
EBITDA levels through organic growth or via acquisitions," said
David Masters, Moody's lead analyst for Hyperion.
Hyperion was formed in 1994 and is substantially owned by a
combination of the management team, together with a private
equity investor, General Atlantic, which acquired a 29% stake in
Hyperion in July 2013 from existing private equity investors.
Factors that could lead to an upgrade of Hyperion's ratings
include: (i) EBITDA (- capex) coverage of interest consistently
exceeding 3x (2012: 3.2x, albeit likely to deteriorate post
refinancing), (ii) free-cash-flow-to-debt ratio consistently
exceeding 6% (2012: 3%), and (iii) debt-to-EBITDA ratio below
4.5x, all on a Moody's adjusted basis.
Factors that could lead to a rating downgrade include: (i) EBITDA
(- capex) coverage of interest below 1.5x, (ii) free-cash-flow-
to-debt ratio below 3%, or (iii) debt-to-EBITDA ratio remaining
above 6.5x, all on a Moody's adjusted basis.
Moody's has assigned the following ratings, with a stable outlook
(and loss given default (LGD) assessments):
Hyperion Insurance Group Limited corporate family rating: B2;
Hyperion Insurance Group Limited probability of default rating:
B3-PD;
Hyperion Insurance Group Limited $250 million senior secured
Term
Loan B: B1 (LGD2, 27%);
Hyperion Insurance Group limited GBP25 million senior secured
revolving credit facility: B1 (LGD2, 27%);
The methodologies used in this rating were Moody's Global Rating
Methodology for Insurance Brokers & Service Companies published
in February 2012, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada and EMEA published in
June 2009.
Based in London, England, Hyperion is a leading UK domiciled
independent insurance intermediary. The company generated
revenues of GBP109 million in 2012.
HYPERION INSURANCE: S&P Assigns Prelim. 'B' CCR; Outlook Stable
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary 'B'
long-term corporate credit rating to U.K.-based insurance
intermediary Hyperion Insurance Group Ltd. (Hyperion). The
outlook is stable.
At the same time, S&P assigned its preliminary 'B' issue rating
to the proposed US$250 million term loan B to be issued by
Hyperion Financial S.a.r.l., a subsidiary of Hyperion. The
preliminary recovery rating on the proposed loan 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 Hyperion's
business risk profile as "fair" and financial risk profile as
"highly leveraged."
S&P considers Hyperion's business risk profile to be constrained
by it being smaller than peers, having relatively lower profit
margins, and running the implicit risk of losing key personnel.
It is also limited by the highly fragmented, competitive, and
cyclical industry in which it operates. These risks are partly
offset by the group's relatively diverse customer, product, and
geographic base. Its good client retention record, ability to
attract and retain top talent in the industry, and strong
leadership are further mitigating factors.
Pro forma the proposed transaction, S&P forecasts the group's
Standard & Poor's-adjusted debt to EBITDA for financial 2013 to
be about 7.1x (5.8x excluding a liquidity put option of
GBP48 million). However, S&P forecasts this ratio to improve to
5.9x (4.7x excluding the liquidity put option) by the end of
financial 2014. S&P includes deferred earn-outs of GBP17 million
and the liquidity put option in the calculation of debt.
However, S&P do acknowledge that the liquidity put option is
highly contingent -- option holders will decide whether to
exercise the option in September 2017 -- and it is currently
deeply subordinated.
"In our base case, we forecast the group's revenues and EBITDA at
about GBP167 million and GBP36 million, respectively, for the
financial year ending Sept. 30, 2013 (financial 2013). For
financial 2014, we expect the organic revenue to grow by a mid-
single digit figure, while maintaining a steady EBITDA margin as
the group focuses on specialized insurance products and new
geographic regions (mainly emerging markets) which have
historically achieved high growth rates," S&P said.
The group has in the past demonstrated good cash flow generation,
which S&P expects to continue. S&P also expects the group to
generate EBITDA cash interest coverage of more than 3x. S&P
views positively the fact that 66% of the group's shareholdings
are held by the group's staff members and do not consider any
substantial shareholder-friendly payments likely at this stage.
S&P expects the group to undertake bolt-on acquisitions on a
regular basis, as it seeks to further diversify its product range
and geographic reach. In S&P's base case, it expects the group
to undertake bolt-on acquisitions of about GBP10 million annually
(excluding the GBP49 million acquisition expected to be completed
in October 2013). (The bolt-on acquisition spend is not
considered in S&P's liquidity calculation because it is not
contracted).
The stable outlook reflects S&P's view that the company will
continue to grow organically. S&P anticipates that it will do
this by utilizing its wide geographic and product diversity to
attract new customers and enable it to generate positive free
operating cash flow of about GBP10 million.
S&P could raise the rating if Hyperion can demonstrate a
consistent improvement in its operating performance including
organic revenue growth of high single digits along with a steady
increase in EBITDA margins as the newly acquired companies, as
well as the start-ups, integrate efficiently. S&P might also
consider an upgrade if the group can improve its credit metrics
so that they are in line with an "aggressive" financial risk
profile, including adjusted debt to EBITDA of less than 5x.
S&P could lower the rating if increased competition and loss of
key personnel were to stifle the group's profitability and cash
flow generation, which could result in negative free operating
cash flow. S&P could also lower the rating if the group were to
undertake a substantial debt-financed acquisition or if its
financial policy became more aggressive than S&P currently
considers it to be.
JERROLD HOLDINGS: S&P Assigns 'B+' LT Counterparty Credit Rating
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' long-term
counterparty credit rating to U.K.-based specialist property
lender Jerrold Holdings Ltd. (Jerrold or the group). S&P also
assigned a 'B+' issue rating to the proposed GBP200 million
senior secured notes issued by the group's wholly owned
subsidiary, Jerrold FinCo PLC. The outlook on Jerrold is stable.
"Our ratings on Jerrold reflect our view of its relatively narrow
profile as a specialist U.K. secured lender with a focus on U.K.
residential property, including second charge mortgages and
bridging finance. We believe that these are inherently higher
risk lending activities. The ratings also incorporate our view
that leverage, by our metrics, is adequate. The ratings are
supported by our view that Jerrold will continue to produce
relatively predictable, recurring earnings and that net interest
margins will remain healthy. We also acknowledge that Jerrold
has a good market position in its chosen business area, and that
as a firm it has become more institutionalized in recent years,"
S&P said.
Jerrold is a non-operational holding company (NOHC). S&P's
ratings on Jerrold reflect the 'b+' group credit profile (GCP),
that is, S&P's view of the creditworthiness of the consolidated
group. S&P' do not believe that there any material barriers to
cash flows from the main operating subsidiaries to the NOHC once
the existing senior facilities are repaid. S&P therefore do not
notch down the ratings on Jerrold from its view of the GCP.
With a track record of over 30 years, Jerrold is an established
U.K. specialist lender. Strategically, Jerrold has maintained a
consistent focus on lending products secured principally on
residential property, the majority of which are second charge
mortgages. This is a market which is typically not served by the
main high street lenders, while the number of competitors has
reduced as a result of the financial crisis. The fact that
Jerrold is narrowly focused on a niche area of the U.K. lending
market is a key ratings weakness, in S&P's view.
The group's net loan book of about GBP1 billion is small in a
U.K. lending context. It has also been fairly constant in size
in recent years owing to rather muted new business volumes,
reflecting market conditions. S&P don't anticipate a sudden
acceleration in loan growth.
Nonperforming loans are high compared with mainstream lenders, at
more than one-quarter of the loan book if legacy development
loans are included, but actual write-offs are low because lending
is secured and Jerrold only writes fairly conservative loan-to-
value ratios at origination. Jerrold's underwriting standards
and large in-house collections team help to keep asset quality
manageable, in S&P's view.
Measured as the ratio of gross debt-to-tangible equity, S&P
calculates Jerrold's leverage to be 1.8x at June 30, 2013.
Following the issuance of the proposed GBP200 million secured
bond and the related reduction in its revolving credit facility
(RCF), S&P expects this metric to be little changed. S&P adjusts
this metric by taking a much more conservative view of provisions
to Jerrold's development book and other legacy loan vintages, so
reducing tangible equity. On S&P's preferred adjusted metric the
ratio is higher at about 2.1x, albeit still adequate at this
rating level. Looking forward, S&P expects leverage to remain
little changed, supported by a continued absence of dividend
payments.
Conversely, S&P considers that EBITDA coverage of cash interest
expense will remain weak for the ratings at close to 2x. S&P is
not anticipating a material improvement in this metric.
Jerrold does not have a banking license, but parts of its
business are regulated. S&P notes that in December 2012 the
Financial Services Authority announced it had imposed a fine on
one of Jerrold's operating subsidiaries, reflecting compliance
and other failings in the period 2004-2009. Since that period,
S&P believes that Jerrold has taken material steps to improve its
risk governance, compliance, and operations and don't believe
that any reputational damage has had any discernible impact on
the group. Nevertheless, given the nature of the markets in which
Jerrold operates and the heightened regulatory environment around
U.K. financial services companies' conduct with consumers,
regulatory and reputational risk is likely to remain an area of
our focus.
S&P has equalized the rating on Jerrold FinCo PLC's proposed
senior secured bond with that of the long-term counterparty
credit rating on Jerrold. This bond is guaranteed by Jerrold and
by certain subsidiaries of Jerrold (including Blemain Finance
Ltd. and Lancashire Mortgage Corporation Ltd., which are two of
the main operating subsidiaries).
S&P has not assigned a recovery rating to the bond. This is
because S&P considers that Jerrold is a balance sheet-centric
business that is akin to an unregulated bank and S&P cannot
devise a default scenario that allows it to model the recovery
scenario with sufficient accuracy.
The stable outlook reflects S&P's expectation that Jerrold will
maintain its solid earnings performance, consistent strategic
focus, and acceptable asset quality.
S&P could lower the ratings on Jerrold if its adjusted debt-to-
tangible equity ratio moves above 2.5x, or if S&P sees evidence
of a marked deterioration in credit risk, competitive dynamics,
or risk appetite.
S&P could raise the ratings if it observes a combination of good
earnings trends, sustainable business growth, the successful
work-out of Jerrold's development loan book, and other legacy
loan vintages and if S&P believes that leverage will remain
comfortably below its 2.0x expectations.
JERROLD HOLDINGS: Fitch Publishes 'B+' Issuer Default Rating
------------------------------------------------------------
Fitch Ratings has published Jerrold Holdings Limited a Long-term
Issuer Default Rating (IDR) of 'B+' and a Short-term IDR of 'B'.
The Outlook on the Long-term IDR is Stable. The agency also has
assigned JH's senior unsecured notes an expected rating of
'B+(EXP)'/'RR4'. The final rating is contingent upon receipt of
final documents conforming to information already received.
Key Rating Drivers
JH's ratings primarily reflect the significant risks arising from
a relatively undiversified and high asset risk business model and
the company's reliance on a limited number of funding sources.
Other rating drivers include the company's modest gearing, its
strong capital generation and robust risk management.
Fitch considers the high arrears present in JH's loan book to be
a feature of its business model, the risk of which is monitored
and managed carefully on an individual basis, with strong
collection and recovery policies in place. Total non-performing
loans and arrears more than 90 days overdue represented a high
31% of receivables at end-March 2013, a figure which has remained
broadly stable over time (it fell slightly in the three months to
June 2013). Nonetheless, actual losses are low, as the company
ensures that it has a solid level of security (mostly residential
and commercial property) backing its loans.
The company has remained consistently profitable throughout its
history, although underlying pre-tax profit has been under
pressure in recent years from higher loan impairment charges
(2010) and falling loan volumes (2011, 2012 and 9M13). Risk is
well remunerated and the wide margins it is able to generate were
not unduly affected by the low base rates. Nonetheless, revenues
rely on the generation of new loans, which are under pressure
from tighter funding available.
Corporate governance is deemed to be improving but currently acts
as a constraint on the ratings. The measures put in place to
reduce reliance on certain key individuals and to establish
improved compliance functions (as introduced in 2011) throughout
the organization should result in an easing of this constraint
over time but this remains to be tested. Regulation over the
company is limited and this also acts as a constraint in the
company's ratings.
Although the company's anticipated senior unsecured bond will
improve the diversification and maturity profile of funding,
Fitch considers the company's overall funding and liquidity
profile, and the low funding headroom to be relative weaknesses.
JH is presently fully reliant on a small syndicate of banks for
its funding as they provide both a revolving credit facility
(RCF) and a secured loan structured out of a remote conduit.
Although the RCF was renewed recently, its maturity is relatively
short compared to the average life of the assets. Furthermore,
the conduit has raised asset encumbrance significantly. This,
combined with lower redemptions, has slowed down new business
that can be written.
The company is not subject to full regulatory capital
requirements but leverage is low and has been boosted in recent
years by a decision taken by shareholders not to pay out
dividends. JH had a comfortable 36% tangible equity/receivables
ratio.
Rating Sensitivities - IDRs
Upside potential to the IDRs is limited by the current weakness
of the company's funding profile. A materially more diversified
funding structure may lead to a move up the rating scale,
although a company with a lack of product diversification, fully
wholesale funded and with a modest business scale would generally
be rated firmly below investment grade. Ratings could also
benefit from better liquidity, which could be generated by the
removal of a large number of non-performing development loans
from its balance sheet
Ratings would be negatively affected by a material increase in
leverage (from dividend payments, for example) or if the
company's plan to diversify its funding profile does not
materialize. Additional rating pressure could be generated by
lower profitability deriving from greater regulatory scrutiny or
competitive pressures
Rating Drivers and Sensitivities - Senior Unsecured Notes
The expected rating on the senior unsecured notes, which have a
maturity of five years, is in line with JH's Long-term IDR, in
keeping with the 'average recoveries' indicated by the 'RR4'
Recovery Fitch has assigned . They are primarily sensitive to any
movement in their anchor rating, JH's Long-term IDR, but could
also be sensitive to any weakening of Fitch's recovery
assumptions in respect of JH's assets.
NTP Kitchens: In Receivership; 29 Jobs Affected
-----------------------------------------------
BBC News reports that NTP Kitchens has gone into receivership,
with 29 jobs set to be lost.
According to BBC, receivers Johnston Carmichael said some staff
had already been made redundant.
NTP's sister company Crosby Kitchens in Rotherham, where six
people are employed, has entered liquidation, BBC discloses.
BBC relates that a spokesperson for NTP Kitchens and Crosby
Kitchens commented: "It is with deep regret that we confirm
[Tues]day that NTP Kitchens has been placed into receivership,
while Crosby Kitchens has entered liquidation.
"These developments stem from the recent recession, which had a
hugely negative impact on retail sales, with customers proving to
be extremely cautious when it came to discretionary purchases
such as kitchens.
"It was hoped that the market would have picked up significantly
by this point -- and demand for kitchens would have returned to
pre-credit crunch levels -- but unfortunately this has not
materialized, leading us to today's decisions."
NTP Kitchens is an Aberdeen kitchen firm. The firm designs,
builds and installs kitchens.
PHONES4U FINANCE: S&P Affirms 'B' CCR; Outlook Stable
-----------------------------------------------------
Standard & Poor's Rating Services said that it affirmed its 'B'
its long-term corporate credit rating on U.K. mobile phone
retailer Phones4U Finance PLC. The outlook is stable.
At the same time, S&P affirmed its 'BB-' issue ratings on
Phone4U's senior secured revolving credit facility (RCF) and 'B'
issue rating on its senior secured bonds. The recovery rating on
the RCF is unchanged at '1', reflecting S&P's expectation of very
high (90%-100%) recovery for senior secured lenders in the event
of a payment default. The recovery rating on the senior secured
bonds is unchanged at '3, reflecting S&P's expectation of
meaningful (50%-70%) recovery prospects in the event of default.
In addition, S&P assigned its 'CCC+' issue rating to the proposed
GBP200 million PIK toggle notes to be issued by Phones4U's parent
Phosphorus Holdco PLC. The issue rating is two notches below the
corporate credit rating on Phones4U. The recovery rating on
these notes is '6', reflecting S&P's expectation of negligible
(0%-10%) recovery prospects in the event of a default.
The affirmation follows Phosphurus Holdco's plan to issue
GBP200 million of payment-in-kind (PIK) toggle notes to fund a
distribution to shareholders. In addition, Phones4U has also
reached agreed to sell its wholesale insurance business,
Lifestyle Services Group (LSG), for a consideration of up to
GBP107 million in cash. These transactions have caused S&P to
revise its assessment of Phones4U's financial risk profile
downward to "highly leveraged" from "aggressive" previously, to
reflect the increase in leverage from the PIK toggle issuance.
The affirmation reflects S&P's view that although these
transactions cause it to revise its reassessment of Phone4U's
financial risk profile downward, the increased leverage is
mitigated by Phones4U's financial flexibility from its cash on
hand and ability to generate free operating cash flow (FOCF).
S&P continues to assess Phone4U's business risk profile as
"weak," reflecting the company's reliance on maintaining strong
contractual relationships with mobile telecoms companies and the
competitive nature of the industry.
For the financial year ending Dec. 31, 2014, S&P forecasts
revenue of about GBP1.15 billion and lease-adjusted EBITDA of
GBP110 million. This corresponds to reported EBITDA of
GBP95 million after S&P's assumption of GBP30 million investment
in LIFE Mobile, a mobile virtual network operator (MVNO). These
forecasts reflect Phones4U's disposal of its LSG business in the
fourth quarter of 2013, which previously contributed about 10% of
revenues and 9% of EBITDA, and its ongoing investment in LIFE
Mobile. In S&P's base-case scenario, it anticipates a lower
number of store openings than historically, at about 25 per year,
and that Phones4U will maintain its contract sales volume market
share.
The proposed issuance of the PIK toggle notes with cash interest
payment obligations will increase Phone4U's Standard & Poor's-
adjusted leverage in 2014 to above 7.0x, with adjusted interest
coverage of about 1.5x. Phone4U's earnings capacity and cash-flow
generation give it the ability to deleverage over time if
appropriately balanced by a more moderate financial policy. S&P
forecasts FOCF in 2014 of about GBP40 million. On completion of
the LSG transaction, S&P forecasts that Phones4U will have more
than GBP150 million cash on hand, supporting its assessment of
its "adequate" liquidity and the company's financial flexibility.
Financial policy considerations are an important rating driver,
and S&P do not envisage any further shareholder distributions or
increased leveraging.
S&P assess Phones4U's liquidity profile as "adequate" under its
criteria. S&P believes that the company's sources of liquidity
will comfortably cover its needs in the near term. S&P's
liquidity assessment is supported by its forecast that the
company's sources of liquidity -- including FOCF, cash on hand,
and access to debt facilities -- will exceed its uses by at least
1.5x over the next 12 months.
S&P bases its liquidity assessment on the following factors and
assumptions:
-- As of June 30, 2013, the company's RCF was undrawn, with
GBP115 million of available funds, and the balance of
GBP10 million used for letters of credit;
-- GBP85 million cash on hand as of June 30, 2013.
-- FOCF generation of about GBP40 million in 2013, according
to S&P's forecast.
-- Capex of about GBP20 million for maintenance, new stores,
and information technology.
-- GBP30 million of capital investment requirements for LIFE
Mobile MVNO in 2014.
-- Based on S&P's forecasts, Phones4U should have more than
15% headroom on the RCF's leverage and interest coverage
maintenance covenants.
The issue rating on the proposed GBP200 million PIK toggle notes
to be issued by Phosphorus Holdco is 'CCC+', which is two notches
below the corporate rating on Phones4U. The recovery rating on
these notes is '6', reflecting S&P's expectation of negligible
(0%-10%) recovery prospects in the event of a default.
The recovery rating on the proposed PIK toggle notes reflects the
contractual and structural subordination of the notes in the
group's capital structure. The notes will not benefit from
guarantees or collateral over the restricted group where the
senior secured notes are currently issued. S&P understands that
the documentation of the notes will contain restrictions over
raising additional indebtedness and restricted payments.
The issue rating on Phone4U's GBP430 million senior secured notes
is 'B', in line with the corporate credit rating. The recovery
rating on these notes is '3', reflecting S&P's expectation of
meaningful (50%-70%) recovery prospects in the event of a
default, at the low end of this range.
The issue rating on the GBP125 million super senior RCF is 'BB-'.
The recovery rating on this instrument is '1', indicating S&P's
expectation of very high (90-100%) recovery prospects in the
event of a default.
The recovery ratings on the RCF and senior secured notes are
supported by S&P's valuation of the company as a going concern in
an event of default; the U.K. jurisdiction, which S&P views as
favorable to creditors; and the relatively comprehensive security
and guarantee package provided to the RCF lenders and
noteholders. The collateral notably includes the brand name
"Phones4U," along with the company's databases.
S&P's hypothetical default scenario contemplates a default in
2015 as a result of deteriorating macroeconomic conditions and
intense pressure on pricing and product mix, combined with the
highly leveraged financial profile of the company. S&P values
Phones4U as a going concern basis to reflect its view of
Phones4U's well-recognized brand name and significantly strong
market position, supported by its cash-generative and resilient
business model.
"At our hypothetical point of default, we estimate a stressed
enterprise value of GBP390 million, equivalent to a 5.5x stressed
valuation multiple. From this we deduct priority liabilities,
primarily related to the cost of enforcement of GBP32 million.
This leaves about GBP360 million available to lenders, which we
assume would first accrue to the RCF, of which we assume there
would be about GBP130 million outstanding (assuming 100% drawing
and six months prepetition interest) at the point of default.
This leaves approximately GBP230 million available for the senior
secured noteholders, equivalent to 50%-70% recovery prospects,
albeit at the low end of the range. This leaves negligible
(0%-10%) recovery prospects for the proposed PIK toggle
noteholders," S&P said.
The stable outlook reflects S&P's view of Phones4U's ability to
generate positive FOCF, its forecast cash on hand on completion
of the sale of its LSG business, and S&P's projection of
continued demand for new mobile devices.
S&P could lower the rating if Phones4U is not able to grow
earnings and reduce adjusted debt to EBITDA. S&P could also
lower the rating if adjusted interest coverage falls sustainably
below 1.5x, FOCF turns negative, or Phone4U's liquidity position
weakens.
Ratings upside is limited due to the company's aggressive
financial policies and ownership by a financial sponsor. However
S&P could raise the ratings if Phones4U stabilizes its margins
and exhibits strong earnings growth, with a sustained improvement
in its business risk profile. Specifically, for S&P to consider
an upgrade, Phones4U would need to achieve adjusted interest
coverage of more than 2.5x and funds from operations to debt of
more than 15%.
PHOSPHORUS HOLDCO: Moody's Rates New GBP200MM Notes '(P)Caa2'
-------------------------------------------------------------
Moody's Investors Service has assigned a provisional (P)Caa2
rating to the proposed GBP200 million PIK toggle notes to be
issued by Phosphorus Holdco plc (issuer) with a stable outlook.
At the same time, Moody's placed all Phones4u Finance plc's
ratings under review for downgrade. Ratings impacted include its
B2 corporate family rating, B2-PD probability of default rating
(PDR), B3 rating on the GBP430 million senior secured notes due
2018 and Ba2 rating on the GBP125 million revolving credit
facility (RCF) due 2017.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody's preliminary
credit opinion regarding the transaction only. Upon conclusive
review of the final documentation, Moody's will endeavor to
assign a definitive rating to the PIK toggle notes. A definitive
rating may differ from a provisional rating.
Ratings Rationale:
The review for downgrade was prompted by Phones4u's announcement
that it plans to raise GBP200 million through the issuance of new
PIK toggle notes at the level of Phosphorus Holdco plc, the
direct parent holding of Phones4u Finance plc. The proceeds from
the PIK toggle notes will be deposited into an escrow account and
will be used to redeem the PIK toggle notes if the disposal of
Lifestyle Service Group (LSG) has not successfully closed by 90
days from the issue date.
On September 5, 2013, Phones4u announced that it had signed a
sale and purchase agreement with Assurant Inc. (Baa2, stable) to
sell its insurance business LSG for up to GBP107 million. The
sale is subject to regulatory approvals and is expected to close
early Q4 2013.
Should the sale of LSG (and the consequent release of PIK
proceeds) successfully close, Moody's would expect to move the
CFR from Phones4u Finance plc to Phosphorus Holdco plc. This
would reflect Moody's view that all group debt including the new
PIK toggle notes should be considered in consolidated metrics.
Given that the issuer of the PIK toggle notes is a holding
company with no independent business operations, it will rely on
cash up-streaming from its subsidiaries to service interest. The
terms of the PIK toggle notes require interest to be paid in cash
("pay if you can") subject to availability under the sum of the
consolidated net income build-up basket and the general basket as
defined in the existing GBP430 million senior secured notes. The
(P)Caa2 rating for the notes reflects the fact that they will be
structurally subordinated to all other debt within the group -
including the existing GBP430 million senior secured notes (due
2018) at Phones4u Finance plc - and will not be guaranteed by any
of the issuer's subsidiaries. It also incorporates Moody's
current expectation that the CFR will be downgraded to B3,
although the company would be weakly positioned in that rating
category. In such a scenario, Moody's would expect to confirm the
B3 rating on the GBP430 million senior secured notes, and
downgrade the rating on the RCF to Ba3.
"The review for downgrade reflects the fact that the company's
credit metrics would materially weaken following the issuance of
the proposed GBP200 million PIK toggle notes", says Margaux Pery,
analyst at Moody's. "Gross leverage, interest cover and free cash
flow would be negatively impacted by the increased amount of debt
and related interest payments", adds Miss Pery. Moody's estimates
that the company's gross debt to EBITDA ratio would increase to
around 5.9x following the issuance of the PIK toggle notes (based
on LTM June 2013 EBITDA as adjusted by Moody's) which would
breach its trigger of 5 times for maintaining the CFR at B2.
The company plans to use the cash proceeds from the PIK toggle
notes together with GBP25 million from its cash reserves to make
a distribution to shareholders. The amount of the contemplated
dividend payment is higher than the initial capital contribution
made by the shareholders in 2011 to acquire the company.
Phones4u's envisaged re-leveraging transaction reflects a more
aggressive financial policy stance than Moody's initially
anticipated.
In the first half of 2013, Phones4u's sales grew by 11.7% to
GBP563 million. The company continued to benefit from consumer
shift towards contracts from prepay. Phones4u's EBITDA margin
decreased to 9.3% from 10% in H1 2012 due to challenging trading
conditions in the mobile phone sector in conjunction with the
launch of the company's new insurance product which has a lower
price than its previous insurance product but is expected to
exhibit a better longevity.
The principal methodology used in these ratings was the Global
Retail Industry published in June 2011. 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 Staffordshire, UK, Phones4u is a leading
independent mobile phone retailer and insurance provider in the
UK. The company has a network of 698 stores across the UK, 159 of
which are concessions within large electrical retail stores run
by Dixons Retail Plc (B1 stable). For the fiscal year ended
December 31, 2012, Phones4u generated revenues of GBP1.138
billion and Moody's-adjusted EBITDA of GBP167 million. Phones4u
is ultimately owned by funds managed or advised by private equity
firm BC Partners, other co-investors, and management.
*********
Monday's edition of the TCR delivers a list of indicative prices
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*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
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Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
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A. Chapman, Editors.
Copyright 2013. All rights reserved. ISSN 1529-2754.
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