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        T R O U B L E D   C O M P A N Y   R E P O R T E R

                           E U R O P E

           Thursday, October 24, 2013, Vol. 14, No. 211

                            Headlines

C Z E C H   R E P U B L I C

LESS & FOREST: Prague Court Approves Reorganization Plan


G E R M A N Y

IVORY CDO: Fitch Affirms 'C' Ratings on Two Note Classes
JBS INVESTMENTS: S&P Assigns 'BB' Rating to Sr. Unsecured Notes
SCHOLZ AG: Sells Two European Assets to Reduce Debt Levels


H U N G A R Y

SOLYOM HUNGARIAN AIRWAYS: Declares Insolvency Prior to Launch


I T A L Y

ALITALIA SPA: Pilots' Union Plans to Hold Strike on Oct. 29


K A Z A K H S T A N

KASPI BANK: Moody's Assigns (P)B1 Rating to Senior Unsecured Debt
KAZEXPORTASTYK JSC: Fitch Affirms 'B' Issuer Default Ratings


L U X E M B O U R G

MERLIN ENTERTAINMENTS: Moody's Affirms 'B1' Corp. Family Rating
QGOG CONSTELLATION: Fitch Affirms 'BB-' Issuer Default Ratings
N E T H E R L A N D S
AVOCA CLO II: Moody's Hikes Rating on Class C-2 Notes to 'Ba3'


S E R B I A

PRIVREDNA BANKA: Postanska Stedionica to Take Over Assets


S L O V E N I A

PROBANKA: NSi Feels ECB Not Happy With Liquidation


S P A I N

FOMENTO DE CONSTRUCCIONES: In Talks with Creditors Over PIK Debt


U N I T E D   K I N G D O M

ARM: FSA Seeks Appointment of Provisional Liquidator
CO-OPERATIVE BANK: Parent's Chairman to Step Down in May
H C HERBERT: Faces Liquidation Following Financial Struggles
HEARTS OF MIDLOTHIAN: May Soon Start Administration Exit Process
MARTYN LEISURE: In Administration, 300 Jobs at Risk

MID STAFFORDSHIRE: Administrators Given More Time by Monitor
NEWCASTLE BUILDING: Fitch Affirms 'BB+' Issuer Default Ratings
SPIRIT ISSUER: Fitch Assigns 'BB(EXP)' Ratings on 2 Note Classes
TAYLOR LEGAL: In Administration, Ceases Trading
WHITWORTH HALL HOTEL: In Administration, Seeks Buyer


X X X X X X X X

* Fitch Says Credit Funds Investor Redemption Risk Looming
* Fitch: Spec. Grade Rating on Sub. Tranches Still on Neg Outlook
* Upcoming Meetings, Conferences and Seminars


                            *********


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C Z E C H   R E P U B L I C
===========================


LESS & FOREST: Prague Court Approves Reorganization Plan
--------------------------------------------------------
According to CTK, Judge Tomas Jirmasek of the Regional Court in
Prague said in the insolvency register on Tuesday that the court
has approved the reorganization plan of Less & Forest and
rejected the company's bankruptcy.

Within the reorganization, successor company Novy Forest is to be
bought by the Agrofert group of billionaire Andrej Babis for
CZK112 million, CTK discloses.

The money gained from the transaction and sale of the remaining
property is to be used for compensation of creditors, CTK says.

Secured creditors are to gain back roughly a third of the value
of their claims and other creditors 8.9% to 12.4%, CTK relays.

The company's stance on Tuesday does not signal whether it will
appear the court decision, CTK notes.

Less & Forest was the largest private forest company in the Czech
Republic.



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G E R M A N Y
=============


IVORY CDO: Fitch Affirms 'C' Ratings on Two Note Classes
--------------------------------------------------------
Fitch Ratings affirmed all notes of Ivory CDO Limited, as
follows:

  EUR36m class A1 (XS0309311909): affirmed at 'Bsf'; Negative
  Outlook

  EUR6m class A2 (XS0309350477): affirmed at 'CCCsf'

  EUR12m class B (XS0309352093): affirmed at 'CCsf'

  EUR12m class C (XS0309353653): affirmed at 'CCsf'

  EUR12m class D (XS0309357050): affirmed at 'Csf'

  EUR2.5m class E (XS0309358298): affirmed at 'Csf'

The transaction is a managed cash arbitrage securitization of
mezzanine asset-backed securities, primarily RMBS, CMBS and CDOs.

Key Rating Drivers

The affirmation reflects the performance of the transaction since
the review in November 2012. Since then, class A1 notes have
amortized by EUR11 million and roughly 25% of the initial balance
remains outstanding. Credit enhancement has increased marginally
on class A1 notes, but decreased on all other notes. This was
partially due to an increase in defaults from nil to EUR11
million over the past year, as well as the continuing deferral of
interest on the junior notes. The portfolio has additionally been
exposed to significant negative rating migration

Amortization of the underlying portfolio has also led to
increased portfolio concentration, with the UK being the largest
country in the portfolio, followed by Germany and Italy. Overall,
European peripheral exposure adds up to 29% of the performing
portfolio.

The Negative Outlook on class A1 notes reflects the weak overall
performance of the portfolio, and the negative rating migration.

Rating Sensitivities

A stress test expanding the underlying collateral's maturity
dates to the notes' legal final maturity has indicated the
possibility of potential negative rating action on the most
senior notes.


JBS INVESTMENTS: S&P Assigns 'BB' Rating to Sr. Unsecured Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB' rating to
JBS Investments GmbH's planned long-term senior unsecured notes.

The rating on the issue reflects the credit quality of JBS
Investments' parent company, JBS S.A. (JBS; BB/Stable/--), as JBS
and its wholly-owned subsidiary, JBS Hungary Holdings Kft (the
holding company of JBS USA LLC) unconditionally guarantee the
notes.

In S&P's view, this transaction is part of JBS' liability
management to extend debt maturities and lower interest payments.
S&P believes the company will use part of the proceeds to pay
down the more expensive loans that it assumed following Seara's
acquisition, of about R$5.85 billion, out of which about 30%
matures in the short term.  JBS continues to report sizable
short-term debt, mainly consisting of working capital and export
finance lines to fund its operations.  However, it has access to
debt and capital markets for refinancing and has been able to
gradually improve its capital structure.  Although JBS assumed
more secured debt through Seara's acquisition, S&P don't believe
the debt will be subordinated as JBS will gradually pay those
loans down through
its ongoing refinancing transactions.

RATINGS LIST

JBS S.A.
  Corporate credit rating           BB/Stable/--

Rating Assigned

JBS Investments GmbH
  Senior unsecured notes            BB


SCHOLZ AG: Sells Two European Assets to Reduce Debt Levels
----------------------------------------------------------
Jethro Wookey at Metal Bulletin reports that Scholz AG on Monday
said it has agreed to the sale of two European assets as it seeks
to reduce debt levels.

According to Metal Bulletin, Scholz's aluminium smelter in
Tatabanya, Hungary, will be sold to US recycler Scepter Inc,
while its recycling yard in Velbert, Germany, will be bought by a
subsidiary of Metallum Holding AG.  The transaction prices for
both deals are undisclosed, Metal Bulletin discloses.

"The smelter is a member of Scholz aluminium group, [and is] part
of the non-core units of Scholz group, which shall be
[divested]," Metal Bulletin quotes Scholz as saying.

Scholz is not the only German aluminium producer that is
struggling financially, the report notes.  Secondary aluminium
producer Oetinger also went into administration in late June
after struggling for a margin at low aluminium prices, Metal
Bulletin relates.

Scholz AG is a German recycling group.



=============
H U N G A R Y
=============


SOLYOM HUNGARIAN AIRWAYS: Declares Insolvency Prior to Launch
-------------------------------------------------------------
Kurt Hofmann at ATWOnline reports that Budapest start-up Solyom
Hungarian Airways, which was due to launch Boeing 737-500 charter
flights from early September and scheduled flights from early
October, went to insolvency before it was able to start
operations.

According to ATWOnlines, several Hungarian media outlets said the
carrier never received an air operator's certificate and talks
with potential investors, especially from Oman, collapsed.

The carrier's management has reportedly disappeared, ATWOnline
discloses.  It had plans to have 12 737-500s by year-end and 50
aircraft by 2017, ATWOnline states.

Founder Jozsef Vago had hoped to recover lost business after
Malev Hungarian Airlines ceased operations in February 2012,
ATWOnline notes.



=========
I T A L Y
=========


ALITALIA SPA: Pilots' Union Plans to Hold Strike on Oct. 29
-----------------------------------------------------------
The Associated Press reports that Alitalia SpA's main pilots'
union has announced a four-hour strike for Oct. 29 to pressure
management for details on how they intend to return the
struggling carrier to health.

UILT secretary-general Marco Veneziano said in a statement the
union could hold more strikes -- up to a combined total of 48
hours -- until it receives "a credible plan" for saving Italy's
flagship airline, the AP relates.  The union rejects proposals
for layoffs and demands a clear plan that includes an
international partner and new management, the AP discloses.

Alitalia's shareholders have agreed to inject EUR300 million
(US$410 million) into the airline as part of an overall EUR500
million plan to save it from bankruptcy, the AP recounts.
Shareholders, including Air France-KLM with a 25% stake, have
until mid-November to declare how much they are willing to
inject, the AP notes.

                         About Alitalia

Alitalia-Compagnia Aerea Italiana has navigated its way through
a successful restructuring.  After filing for bankruptcy
protection in 2008, Alitalia found additional investors, acquired
rival airline Air One, and re-emerged as Italy's leading airline
in early 2009.  Operating a fleet of about 150 aircraft, the
airline now serves more than 75 national and international
destinations from hubs in Fiumicino (Rome), Milan, Turin, Venice,
Naples, and Catania.  Alitalia extends its network as a member of
the SkyTeam code-sharing and marketing alliance, which also
includes Air France, Delta Air Lines, and KLM.  An Italian
investor group owns a majority of the company, while Air France-
KLM owns 25%.



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K A Z A K H S T A N
===================


KASPI BANK: Moody's Assigns (P)B1 Rating to Senior Unsecured Debt
-----------------------------------------------------------------
Moody's Investors Service has assigned a provisional (P) long-
term foreign-currency senior unsecured debt rating of (P)B1 to
Kaspi Bank JSC's US dollar-denominated notes to be issued
directly by the bank. The outlook on the rating is stable.

Moody's says that the (P)B1 rating assigned to the notes is based
on the fundamental credit quality of Kaspi Bank JSC, and is
aligned with its baseline credit assessment of b1.

Ratings Rationale:

The (P)B1 rating is underpinned by the bank's established retail
lending franchise, sound profitability and healthy capital
buffer. However, it also takes into account the potential
vulnerability of the bank's business to the volatile operating
environment, especially against the background of rapid loan book
growth.

According to the terms and conditions of the notes, Kaspi Bank
must comply with a number of covenants, including negative pledge
covenants, limitations on mergers and disposals, transactions
with affiliates and minimum capital adequacy maintenance.

Key features of the notes which drive the rating outcome on Kaspi
Bank are (1) the expected maturity of 3 to 5 years; and (2)
ranking as unconditional, unsubordinated and unsecured
obligations. In the event of bankruptcy or liquidation of Kaspi
Bank, the notes will rank pari passu with all unsecured and
unsubordinated debt.

What Could Move the Ratings Up/Down:

An upgrade of Kaspi Bank's ratings will be contingent on the
bank's ability to further develop its franchise via the
diversification of its business (by products and segments) and to
reduce funding concentrations, whilst maintaining a healthy
capital buffer and an adequate risk appetite.

Any material adverse changes in Kaspi Bank's risk profile --
particularly any significant weakening of the bank's liquidity
position or an increase in its risk appetite together with a
decreasing capital adequacy -- would exert negative pressure on
the bank's ratings.


KAZEXPORTASTYK JSC: Fitch Affirms 'B' Issuer Default Ratings
------------------------------------------------------------
Fitch Ratings has affirmed Kazakhstan-based JSC Holding
KazExportAstyk's (KEA) Long-term foreign and local currency
Issuer Default Ratings (IDRs) at 'B' and its National Long-term
rating at 'BB(kaz)' with a Stable Outlook. Fitch has also
upgraded its senior unsecured rating to 'B' from 'B-' and
National senior unsecured rating to 'BB(kaz)' from 'B+(kaz)'.

The IDRs and Stable Outlook reflect our expectation of sustained
cash flows and financial performance based on moderately
increasing crop yields, despite weaker selling prices. The
ratings also reflect high inherent business risks.

Financial flexibility has improved on the back of the equity
injection made by EBRD (AAA/Stable), as a new investor owning 13%
of KEA's share capital, a diminished exposure to the leasing
business and positive free cash flows (FCF) supported by recent
debt refinancings. The change in debt composition towards
unsecured borrowings underpins the upgrade of the senior
unsecured rating to 'B'.

Key Rating Drivers

High Business Risks

The IDRs continue to reflect the group's moderate to high
business risks due to the cyclicality and seasonality of the
agricultural commodities sector, its reliance on one geographical
area and lack of any large scale vertical integration or
diversification beyond ancillary agricultural services. This is
mitigated by its long-term partnership agreements with 20 partner
agro-firms and, more recently, by increasing diversification to
include own farming and by crop production to optimize use of
land along with rising exports.

Strong Market Position

KEA is the third-largest grain producer in Kazakhstan and a
leading producer of oilseeds. Together with its partner agro-
firms, KEA operates a land bank of over 1,054 thousands hectares,
with sufficient storage (1.5 million tonnes) for active trading.
While it has strong bargaining power with local grain suppliers,
all traders including KEA remain dependent on the intervention of
state-owned Food Contract Corporation (FCC) to support domestic
prices, particularly in years of bumper harvest.

Resilient Financial Performance

Despite a severe drought in Kazakhstan in 2012 causing gross
harvest at KEA and its partner agro-firms to fall by 44% yoy, KEA
showed a 33% growth in revenues to KZT70.6 billion, driven by
larger grain trading volumes and higher grain prices. Although
the lower-margin trading operations put pressure on KEA's EBITDA
margin (27% in 2012 vs. 32% in 2011), KEA ended 2012 with
positive FCF. This was due to better working capital management
and low capex. We expect positive FCF in 2013 on expected higher
operating profitability due to less trading activity. However,
future FCF may be constrained by dividend payouts, which we
assume will be moderate, and subject to KEA's operating
performance.

Difficult Operating Environment

Kazakhstan has unpredictable climate conditions, leading to low
and unreliable crop yields that are only partly mitigated by
higher quality wheat, government support and a favorable global
outlook for grain demand. In addition, low production costs are
offset by higher distribution costs of exports to trading hubs
(Baltic and Black Sea terminals). Although KEA maintains well
invested infrastructure, we believe that further investments or
partnerships will be required to ensure continuing access to
export markets.

Improved Debt Profile

KEA has shown continued reduction of secured debt, amounting to
just 7% of its debt portfolio as of June 2013 vs. 24% in 2012.
Most of the debt is long-term with 66% of total debt to be repaid
in 2016. Moreover, Fitch expects total debt to stay stable over
2013-2016. Total adjusted debt to operating EBITDAR improved to
3.6x in FY12 from 4.5x in FY11 and is likely to increase towards
4x in 2013 before slightly declining thereafter. Funds from
operations (FFO) fixed charge coverage exceeded 2x in 2012 and we
expect it to further improve in 2013-14 on the back of expected
stronger FFO.

Diminished Subordination for Unsecured Creditors

Recent progress towards refinancing secured debt with unsecured
borrowings, as well as general de-leveraging, have caused us to
improve our recovery expectations for unsecured bondholders to
average recovery prospects (or Recovery Rating RR4) from below-
average (RR5) previously. This is, however, soft-capped at the
IDR level for Kazakhstan issuers due to country-specific
treatment of RR by Fitch. In the event of default we believe
liquidation would yield greater recoveries than a going concern
sale/restructuring due to KEA's high working capital-related
assets. Our view on expected recoveries is, however, tempered by
the weak terms of the unsecured bond, such as the lack of robust
covenants and restrictions to incur additional debt.

Rating Sensitivities

Negative: Future developments that may, individually or
collectively, lead to a negative rating action include:

   -- Inability to maintain cash on balance sheet plus
      inventories and available undrawn committed facilities (as
      a percentage of short-term debt maturities) above 80% (in
      excess of 250% as of FYE12; 100% as of FYE11)

   -- Total lease-adjusted debt/EBITDAR above 4x, equivalent to
      FFO adjusted leverage above 5x, together with negative FCF
      over a two-year period

Positive: Although Fitch considers further positive ratings
momentum to be limited due to its modest scale and material
exposure to cash flow volatility, any future developments that
may, individually or collectively, lead to a positive rating
action include

   -- Greater diversification through vertical integration, crop
      plantings and increased exports as a percentage of sales

   -- Total lease-adjusted debt/EBITDAR under 2x, equivalent to
      FFO adjusted leverage under 3x

   -- FFO fixed charge cover above 3x

   -- Positive free cash flow after acquisition or dividends for
      at least two consecutive years

   -- Full coverage of short-term debt commitments with available
      liquidity



===================
L U X E M B O U R G
===================


MERLIN ENTERTAINMENTS: Moody's Affirms 'B1' Corp. Family Rating
---------------------------------------------------------------
Moody's Investors Service has affirmed the B1 corporate family
rating (CFR) and the B2-PD probability of default rating (PDR) of
Merlin Entertainments S.ar.l, which is the ultimate holding
company for Merlin Entertainments Group and its operating
subsidiaries. The B1 rating of the credit facilities is also
affirmed. Concurrently, Moody's has changed the outlook on all
ratings to positive from stable.

"The positive outlook reflects the company's announcement on 21
October 2013 that it intends to list its shares on the London
Stock Exchange, with at least a 20% free float, and obtain
proceeds of about GBP200 million, which Moody's expects will be
largely used for debt reduction," says Richard Morawetz, a
Moody's Vice President - Senior Credit Officer and lead analyst
for Merlin.

Ratings Rationale:

The CFR of B1 reflects that while Merlin has a strong position as
a global operator of theme parks and attractions, it is still
small relative to companies in the broader services industry, and
has a fairly leveraged capital structure. Merlin is the second-
largest operator of visitor attractions globally after Walt
Disney Company (A2 stable), owning internationally recognized
brand names including Madame Tussauds, The Dungeons, Alton
Towers, LEGOLAND, SEA LIFE, Gardaland and the London Eye. The
company's mixture of theme parks and 'midway' attractions (i.e.
city centre or resort-based attractions with a 1-2 hour dwell
time), as well as indoor and outdoor activities (the latter
accounting for approximately 40% and 60% of revenues,
respectively), has proven resilient to external shocks in recent
years.

Merlin has recorded steady growth in visitor numbers and the
number of attractions. However, comparable visitor numbers and
revenues (i.e., on a like-for-like basis) dipped marginally in
2012, when the company experienced a slowdown in visitor volumes
in Europe, negatively affected by both poor weather conditions
and competition from the summer Olympics in London. Nevertheless,
Merlin's underlying EBITDA, as reported, was at GBP346 million
for year-end 2012, versus GBP306 million in 2011 (for 53 weeks;
or GBP296 million on a comparable 52-week basis), with the
increase reflecting acquisitions, new openings, as well as
reductions in certain variable costs. While Merlin has grown its
geographical coverage in recent years (particularly in Asia-
Pacific, with a concurrent diminishing share of European
revenues), its ratings remain constrained by its fairly leveraged
capital structure.

Merlin's adjusted leverage, measured by debt/EBITDA, was at about
5x as of financial year-end 31 December 2012, and Moody's expects
that leverage will decline somewhat following the proposed share
issuance. The transaction is expected to be completed in the
coming weeks. The company reports that total group sales grew
11.1% in the first 35 weeks of 2013.

Outlook:

The positive outlook reflects Moody's expectation that the
transaction will improve the company's debt metrics and, combined
with expected gradual deleveraging over the next few quarters,
could exert upward pressure on the ratings.

What Could Move the Rating Up/Down:

A deleveraging trend, with adjusted debt/EBITDA well below 5x,
could be positive for Merlin's ratings or outlook. Conversely, a
more aggressive financial policy, or a significant industry
downturn, neither of which Moody's expects at this time, could
lead to negative ratings pressure if gross leverage were to rise
beyond 6.0x. Although currently not expected, the emergence of
liquidity risks could also exert downward pressure on the rating.

Outlook Actions:

Issuer: Merlin Entertainments Group Lux 2 Sarl

  Outlook, Changed To Positive From Stable

Issuer: Merlin Entertainments S.ar.l

  Outlook, Changed To Positive From Stable

Affirmations:

Issuer: Merlin Entertainments Group Lux 2 Sarl

  Senior Secured Bank Credit Facility Jul 31, 2019, Affirmed B1

  Senior Secured Bank Credit Facility Jun 28, 2018, Affirmed B1

  Senior Secured Bank Credit Facility Jun 28, 2019, Affirmed B1

  Senior Secured Bank Credit Facility Jun 28, 2019, Affirmed B1

  Senior Secured Bank Credit Facility Jul 22, 2017, Affirmed B1

  Senior Secured Bank Credit Facility Jul 31, 2019, Affirmed B1

Issuer: Merlin Entertainments S.ar.l

  Probability of Default Rating, Affirmed B2-PD

  Corporate Family Rating, Affirmed B1


QGOG CONSTELLATION: Fitch Affirms 'BB-' Issuer Default Ratings
--------------------------------------------------------------
Fitch Ratings has affirmed QGOG Constellation S.A.'s foreign and
local currency Issuer Default Ratings (IDRs) and US$700 million
senior unsecured notes due 2019 at 'BB-'. The Rating Outlook is
Stable.

Key Rating Drivers

Constellation's ratings reflect the company's high consolidated
leverage and structural subordination to its operating
subsidiaries' project finance debt, which at times may limit cash
flow disbursements from the operating subsidiaries (Opcos) to the
Holdco depending on various financial covenants. Positively,
consolidated leverage is expected to rapidly decline as the
project finance debt at the operating companies amortizes.
Constellation's ratings also reflect the stable and predictable
cash flow generation of the company's OpCos' offshore drilling
assets, which are supported by long-term contracts with
investment grade rated Petroleo Brasileiro S.A. (Petrobras; IDR
'BBB'). The ratings also incorporate the favorable demand
prospects for oil and gas services in Brazil driven by
Petrobras' aggressive capital expenditure program as well as new
exploration and production entrants to the market.

High Initial Leverage and Adequate Liquidity
The company's consolidated leverage is considered high for the
rating category and is expected to decrease over the near term as
the debt at the OpCos rapidly amortize to levels more consistent
with the rating category. As of the last 12 months (LTM) ended
June 30, 2013, leverage as measured by total debt to EBITDA was
approximately 6.0x. Fitch expects the company to lower its
consolidated leverage ratio to below 4.0x within the next few
years, which is more in line with the assigned ratings. Total
debt as of June 30, 2013 reached approximately US$3.2 billion,
while EBITDA was US$535 million. As of June 30, 2013,
debt at the OpCo level amounted to US$2.4 billion, out of
approximately US$3.2 billion of total consolidated debt.

Constellation's liquidity is supported by a 12 months debt
service reserve account and the company's cash on hand, which
somewhat mitigates possible disruptions of cash flow to the
Holdco from the OpCos due to debt restrictions at the OpCos. As
of June 30, 2013, cash and cash equivalent amounted to
US$421 million, of which approximately US$229 million were at the
holding company level and the balance was at the operating
companies. Also a positive factor for the company's
liquidity was the equity injection of approximately US$300
million from its shareholders during September 2013, which the
company expects to use to partially fund its approximately
US$200 million equity contribution for a new ultra deep water
(UDW) drilling rig it ordered in November of 2012.

Structural Subordination to Operating Companies' Debt
The potential retention of cash flows after debt service at the
OpCo level makes cash flow to the Holdco somewhat less stable and
unpredictable than the cash flow from operation of its
subsidiaries. Most of the project finance debt at the OpCos have
cash sweep provisions and minimum debt service coverage ratios
(DSCR) (e.g. 1.2 or above) that must be met before cash flow
distributions are allowed to be made to the Holdco. Specific
assets (Lone and Gold Star) are not permitted to distribute
excess cash to the holding company until all project finance debt
is repaid.

Cash distributions to Constellation are sensitive to the
operating performance of the OpCos' (the rigs') uptime
performance. For example, in the case of the Alaskan-Atlantic
operating assets, a decline in the uptime rate to 95% or below
from the combined 15 years historical average of 96.3% will
likely prevent these assets from distributing cash to the Holdco.
Gold and Lone Star financing are not expected to distribute any
cash to the holding company until Gold Star is released
from the associated financing and Lone Star until all debt is
paid off, which is expected to fully amortize by 2017. Under
Fitch's base case assumption of an average uptime rate of 95%,
net cash flow distributions to Constellation from its OpCos is
expected to average between US$50 million and US$70 million over
the next four years. Net distributions to Constellation are
expected to notably increase beyond 2017 as some project finance
debt is fully amortized and should increase if uptime rates are
higher than projected.

Predictable Revenues and Strong Backlog

Constellation's consolidated revenues and cash flow from
operations are stable and predictable, reflective of its long-
term contractual structure, for the most part with Petrobras. The
company provides onshore and offshore oil and gas drilling
services through its different subsidiaries. The average
remaining contract life for its existing majority owned offshore
drilling assets is approximately three and a half years. The
company currently operates eight offshore drilling units under
long-term contracts with Petrobras and has placed an order to
build a new 100% owned UDW drillship yet to be contracted,
which adds to risk. The company also operates nine onshore rigs,
which are, for the most part, contracted with Petrobras. The bulk
of the holding company's cash flow comes from its offshore
services.

Constellation's current contract backlog, excluding contract
renewal options, of approximately US$10 billion bodes well for
the company's credit profile as it supports cash flow
predictability. Of the company's current backlog, approximately
half relates to the offshore drilling assets where the company
has majority participation. The balance of the backlog relates to
other assets without majority participation as well as its
onshore assets.

Strong Demand for Drilling Rigs in Brazil

Long term demand prospects for oil and gas services in Brazil,
including demand for offshore drilling rigs and production
equipment, are strong. Driven by a government initiative to
increase the country's oil and gas production, Petrobras has
embarked on an aggressive capital investment program of up to
US$236 billion over the next four years. Further, the government
has implemented requirement that a high percentage of the work
and materials provided for these expenditures be from 'local'
sources in order to boost economic activity. The combination of
higher demand and the local content mandate for oil and gas
related services support long-term demand prospects for the
company as well as its ability to renew contracts at
favorable rates.

Rating Sensitivities

Considerations that could lead to a negative rating action
(Rating or
Outlook) include:

   -- Failure to lower leverage to 4.0x or below; or
   -- An overly aggressive growth strategy that could pressure
      credit metrics (somewhat mitigated by the issuance's
      covenants).

Considerations that could lead to a positive rating action
(Rating or Outlook) include:

   -- Injection of new capital into the company, depending on how
      it invests the new funds and the lead time required for the
      new investments to generate cash flow from operations.



=====================
N E T H E R L A N D S
=====================


AVOCA CLO II: Moody's Hikes Rating on Class C-2 Notes to 'Ba3'
--------------------------------------------------------------
Moody's Investors Service has upgraded the rating of the
following notes issued by Avoca CLO II B.V.:

EUR21M Class A-2 Senior Secured Floating Rate Notes due 2020,
Upgraded to Aaa (sf); previously on Jun 17, 2013 Upgraded to Aa1
(sf)

EUR27M Class B Senior Secured Deferrable Floating Rate Notes due
2020, Upgraded to A2 (sf); previously on Jun 17, 2013 Upgraded
to Baa2 (sf)

EUR15.7M Class C-1 Senior Secured Deferrable Floating Rate Notes
due 2020, Upgraded to Ba3 (sf); previously on Jun 17, 2013
Affirmed B1 (sf)

EUR7.5M Class C-2 Senior Secured Deferrable Fixed Rate Notes due
2020, Upgraded to Ba3 (sf); previously on Jun 17, 2013 Affirmed
B1 (sf)

Moody's also affirmed the ratings of the following notes issued
by Avoca CLO II B.V.:

EUR256M (current outstanding balance of EUR65.4M) Class A-1
Senior Secured Floating Rate Notes due 2020, Affirmed Aaa (sf);
previously on Jun 17, 2013 Affirmed Aaa (sf)

EUR5M Class D Senior Secured Deferrable Floating Rate Notes due
2020, Affirmed Caa3 (sf); previously on Jun 17, 2013 Affirmed
Caa3 (sf)

Avoca CLO II B.V., issued in November 2004, is a Collateralised
Loan Obligation ("CLO") backed by a portfolio of high yield
senior secured European and US loans, managed by Avoca Capital
Holdings Limited. This transaction ended its reinvestment period
in January 2010.

Ratings Rationale:

According to Moody's, the upgrade actions taken on the Class A-2,
B, C-1 and C-2 notes are primarily a result of significant
amortization of the Class A1 notes and subsequent improvement of
the senior overcollateralization ratio since the last rating
action in June 2013.

Moody's notes that the Class A-1 notes have been paid down by
approximately 74.4% or EUR190.6 million since closing and 14.7%
or EUR37.7 million since the last rating action in June 2013. As
a result of the deleveraging, the overcollateralization ratios
have increased. As of the latest trustee report in August 2013,
the Class A, B, C and D overcollateralization ratios are reported
at 168.1%, 128.1%, 106.3% and 102.6%, respectively, compared to
145.6%, 119.6%, 103.7% and 100.8% in the April 2013 report upon
which the last rating action was based. The Class D
overcollateralization test is currently failing.

The stability of the underlying credit quality is observed
through a constant average credit rating of the portfolio (as
measured by the weighted average rating factor "WARF") and low
proportion of securities from issuers rated Caa1 and below. In
particular, as of the latest trustee report in August 2013, the
WARF is 2873 compared to 2812 in the April 2013 report upon which
the last rating action was based. Securities rated Caa1 or lower
currently make up approximately 2.7% of the underlying portfolio
versus 1.8% in April 2013.

Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, diversity
score, and weighted average recovery rate, are based on its
published methodology and may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds balance of EUR145.3 million, defaulted par of EUR6.4
million, a weighted average default probability of 24.5%
(consistent with a WARF of 3568), a weighted average recovery
rate upon default of 50% for a Aaa liability target rating, a
diversity score of 14 and a weighted average spread of 3.9%. The
default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. For a Aaa liability target rating,
Moody's assumed that 100% of the portfolio exposed to first lien
senior secured corporate assets would recover 50% upon default.
In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
relevant factors. These default and recovery properties of the
collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed.

In addition to the base case analysis described above, Moody's
also performed sensitivity analyses on key parameters for the
rated notes: Deterioration of credit quality to address the
refinancing and sovereign risks -- approximately 12.4% of the
portfolio are European corporate rated B3 and below and maturing
between 2014 and 2016, which may create challenges for issuers to
refinance. Approximately 4.09% of the portfolio are exposed to
obligors located in Spain. Moody's considered a model run where
the base case WARF was increased to 3919 by forcing ratings on
25% of such exposure to Ca. This run generated model outputs that
were within one notch from the base case results.

Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, which could negatively impact the
ratings of the notes, as evidenced by 1) uncertainties of credit
conditions in the general economy and 2) the large concentration
of lowly rated debt maturing between 2014 and 2016 which may
create challenges for issuers to refinance. CLO notes'
performance may also be impacted either positively or negatively
by 1) the manager's investment strategy and behavior and 2)
divergence in legal interpretation of CDO documentation by
different transactional parties due to embedded ambiguities.

Sources of additional performance uncertainties are described
below:

1) Portfolio amortization: The main source of uncertainty in this
transaction is the pace of amortization of the underlying
portfolio. Pace of amortization could vary significantly subject
to market conditions and this may have a significant impact on
the notes' ratings. In particular, amortization could accelerate
as a consequence of high levels of prepayments in the loan market
or collateral sales by the Collateral Manager or be delayed by
rising loan amend-and-extend restructurings. Fast amortization
would usually benefit the ratings of the senior notes but may
negatively impact the mezzanine and junior notes.

2) Moody's also notes that around 54.2% of the collateral pool
consists of debt obligations whose credit quality has been
assessed through Moody's credit estimates. Large single exposures
to obligors bearing a credit estimate have been subject to a
stress applicable to concentrated pools as per the report titled
"Updated Approach to the Usage of Credit Estimates in Rated
Transactions" published in October 2009.

3) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility in
market prices. Realization of higher than expected recoveries
would positively impact the ratings of the notes.

Moody's modelled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's Global
Approach to Rating Collateralized Loan Obligations" rating
methodology published in May 2013.

Under this methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent
identical assets, the number of which is being determined by the
diversity score of the portfolio. The default and recovery
properties of the collateral pool are incorporated in a cash flow
model where the default probabilities are subject to stresses as
a function of the target rating of each CLO liability being
reviewed. The default probability range is derived from the
credit quality of the collateral pool, and Moody's expectation of
the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool.

The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's CDOEdge
model.

This model was used to represent the cash flows and determine the
loss for each tranche. The cash flow model evaluates all default
scenarios that are then weighted considering the probabilities of
the binomial distribution assumed for the portfolio default rate.
In each default scenario, the corresponding loss for each class
of notes is calculated given the incoming cash flows from the
assets and the outgoing payments to third parties and
noteholders. Therefore, the expected loss or EL for each tranche
is the sum product of (i) the probability of occurrence of each
default scenario; and (ii) the loss derived from the cash flow
model in each default scenario for each tranche.

As such, Moody's analysis encompasses the assessment of stressed
scenarios.

In addition to the quantitative factors that are explicitly
modelled, qualitative factors are part of the rating committee
considerations. These qualitative factors include the structural
protections in each transaction, the recent deal performance in
the current market environment, the legal environment, specific
documentation features, the collateral manager's track record,
and the potential for selection bias in the portfolio. All
information available to rating committees, including
macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature and
severity of credit stress on the transactions, may influence the
final rating decision.

On August 14, 2013, Moody's released a report, which describes
how Moody's proposes to incorporate/assess the additional credit
risk of exposures domiciled in countries with country ceilings
that are single A or lower when rating CLO tranches that carry
ratings higher than those ceilings. See Request for Comment:
"Moody's Approach to Capturing Country Risk in CLOs" published in
August 2013. Once the updated methodology is implemented, given
the limited exposure to these countries in Avoca CLO II B.V., the
ratings of the notes affected by actions should not be impacted.



===========
S E R B I A
===========


PRIVREDNA BANKA: Postanska Stedionica to Take Over Assets
---------------------------------------------------------
Ivana Sekularac at Reuters reports that Serbia's finance ministry
said on Tuesday it plans to transfer assets of Privredna Banka
Beograd AD to state-owned Postanska Stedionica Bank AD, the
second such takeover this year.

Serbian media reported earlier this month that Privredna Banka
Beograd had a high percentage of non-performing loans, Reuters
recounts.

According to Reuters, Serbia's central bank estimates bad debts
at about 20% of all loans in the country's financial system.

Reuters relates that in a statement, the ministry said it would
ask the government to approve the transfer of all insured and
non-insured deposits and some other assets of Privredna Banka
Beograd to Postanska Stedionica.

"The difference between liabilities and assets will be covered
with government bonds," Reuters quotes the statement as saying.
"This is necessary to preserve the stability of the financial
system."

Absorbing the bad loans into the state-owned bank will add to the
pressures on Serbia's finances just as the government is making a
fresh attempt to reverse a trend of mounting state debt, Reuters
states.

Bloomberg News' Gordana Filipovic reports that the Serbian
Finance Ministry said in an e-mailed statement Privredna Banka
Beograd will have its insured and uninsured deposits transferred
to Postanska Stedionica Banka as of Oct. 28.

Privredna Banka Beograd will be the third bank, majority owned by
the government, to be absorbed by Postanska Stedionica Bank AD,
Bloomberg notes.



===============
S L O V E N I A
===============


PROBANKA: NSi Feels ECB Not Happy With Liquidation
--------------------------------------------------
STA News reports that the opposition New Slovenia (NSi) said that
recommendations of the European Central Bank related to the
government-adopted changes to the banking act indicate that the
ECB would have preferred receivership at Probanka and Factor
banka over liquidation, which was the path chosen by Banka
Slovenije and the government.



=========
S P A I N
=========


FOMENTO DE CONSTRUCCIONES: In Talks with Creditors Over PIK Debt
----------------------------------------------------------------
Esteban Duarte and Manuel Baigorri at Bloomberg News report that
Fomento de Construcciones & Contratas SA is in talks with
creditor banks to convert part of the company's loans into
payment-in-kind debt.

According to Bloomberg, two people familiar with the matter said
the higher-yielding PIKs, which allow borrowers to roll up
interest so that it's paid when the debt comes due, will total
about EUR1.5 billion (US$2.1 billion).  They said that the
Barcelona-based company is currently seeking to refinance about
EUR5 billion of loans.

Bloomberg relates that the company reported a first-half net loss
of EUR607.6 million in August, compared with a profit of EUR53.4
million a year earlier.

Bloomberg notes that people familiar with that matter said on
Oct. 4 Promotora de Informaciones SA, the biggest Spanish media
company, is also in talks with creditor banks to convert part of
its debt into PIK notes.

Fomento de Construcciones & Contratas SA is a Spanish
infrastructure company.



===========================
U N I T E D   K I N G D O M
===========================


ARM: FSA Seeks Appointment of Provisional Liquidator
----------------------------------------------------
Times of Malta reports that the Malta Financial Services
Authority said ARM has filed an application in the UK courts
requesting to be placed under voluntary arrangement and that a
provisional liquidator be appointed in the UK.

In a statement last month, the authority had announced that a
decision of the Luxembourg regulator (CSSF) to refuse to grant a
license to ARM as a regulated securitization undertaking under
Luxembourg law was final and could not be appealed, Times of
Malta relates.

According to Times of Malta, the CSSF asked the Luxembourg Courts
to order the dissolution and liquidation of ARM and the
Luxembourg Courts were expected to appoint a supervisory judge,
who would be in charge of the supervision of the liquidation of
ARM, as well as one or more liquidators.

The MFSA said that besides its application in the UK courts, on
Oct. 14, ARM issued a notice to bondholders informing them that
on Oct. 9, auditors Mark James Shaw and Malcolm Cohen were
appointed as provisional liquidators of ARM by order of the High
Court of Justice of England and Wales, Times of Malta relays.

The provisional liquidators have the exclusive power to control
and manage ARM's affairs, and the powers of the directors of ARM
are suspended, Times of Malta notes.

The provisional liquidators are now assessing which assets belong
to ARM and their value, as well as how much may be due to
creditors, Times of Malta says.

The MFSA, as cited by Times of Malta, said that given the recent
developments in the UK, it was still unclear whether the process
related to the dissolution and liquidation of ARM in Luxembourg
would continue.


CO-OPERATIVE BANK: Parent's Chairman to Step Down in May
--------------------------------------------------------
James Quinn at The Telegraph reports that the chairman of the
Co-operative Group has become the latest victim of the fall-out
at the stricken mutual.

Len Wardle, the former university lecturer who has chaired the
GBP13.5 billion turnover conglomerate for the past six years,
will stand down next May, The Telegraph discloses.

Mr. Wardle announced his departure just a day after it emerged
the mutual will lose control of its banking arm as the result of
a GBP1.5 billion recapitalization agreement with a number of
hedge fund bondholders, The Telegraph notes.

The news came just hours after former group chief executive Peter
Marks blamed regulators for shifting the goalposts on capital as
the key reason behind the bank's GBP1.5 billion shortfall, and as
new data showed its supermarket business is losing market share,
The Telegraph discloses.

According to The Telegraph, Mr. Wardle has called for the mutual
to appoint an independent chairman for the first time in its 172-
year history in an attempt to begin to rebuild the group
following a damaging six month period.

                             Inquiry

Mr. Marks, meanwhile, used a much-awaited appearance before the
Treasury Select Committee to attempt to defend his role in the
current crisis, claiming that he was only "partly responsible"
for the bank's current problems, The Telegraph relays.

Mr. Marks told the committee, "My official role at the bank was
that of non executive director," denying suggestions he had acted
as a shadow executive director and claiming he was responsible
for all of the group's nine businesses bar the bank, The
Telegraph relates.

However, facing intense questioning during which he was branded
as "out of his depth," "gung-ho," and suffering from "selective
amnesia," Mr. Marks did admit that he had been the "driving
force" behind the attempt to buy 631 branches from Lloyds, The
Telegraph notes.

But Mr. Marks, who retired in May, said the Lloyds deal, which
collapsed a month earlier in April, would only have strengthened
the group, The Telegraph states.  According to The Telegraph, he
insisted that the Co-op was not "Peter Marks PLC" and that all
decisions relating to the bank were taken unanimously by the
group board and the separate bank board.  Instead, he laid the
blame for the bank's current capital predicaments on its 2009
merger with Britannia Building Society -- impairments on
commercial loans from which have triggered the shortfall -- and
regulators shifting the goal posts on capital requirements, The
Telegraph recounts.

According to The Telegraph, over and over, Mr. Marks branded the
bank's problems a "tragedy" and claimed "the bank is a victim of
the financial crisis."

The former chief executive, who joined the Co-op movement as a
17-year-old shelf stacker in 1967, also blamed the archaic
governance structure of the Co-op Group, and claimed the member-
elected board is incapable of making a strategic decision, The
Telegraph relates.

                         Ethical Values

Sharlene Goff at The Financial Times reports that Mr. Marks has
warned that a restructuring of the mutual's banking business
would destroy its ethical values, but refused to be held
personally accountable for the crisis that engulfed the lender.

"It's not a Co-op," the FT quotes Mr. Marks as saying.  "Hedge
funds are there to maximize profit -- that's what their sole
purpose in life is.  To be truly ethical they can't do that."

His comments undermined a promise by the Co-op Group's new
management team to stay true to the bank's ethical principles,
even though the Co-op will only own 30% of the bank in future,
the FT notes.

Mr. Marks, as cited by the FT, said the crisis at the Co-op Bank
was a "tragedy" -- but could ultimately be beneficial as it would
force the group to narrow its focus and preserve capital.

"I think it's a tragedy -- for the group, for the movement, for
me personally . . .  But there was a degree of inevitability as
the Co-op was trying to stretch its capital across too many
businesses," the FT quotes Mr. Marks as saying.

                    About Co-operative Bank

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.


H C HERBERT: Faces Liquidation Following Financial Struggles
------------------------------------------------------------
Ashleigh Wight at Commercial Motor reports that H C Herbert &
Sons (Maesteg) is to be wound-up, after experiencing financial
struggles for a number of years.

The company, which was authorized to run 10 vehicles and 10
trailers out of a site in Maesteg, near Bridgend, appointed
liquidator Timothy Heaselgrave of Greenfield Recovery on Oct. 9,
Commercial Motor relates.

According to Commercial Motor, the firm's most recent set of
accounts for the year ended March 31, 2012, published to
Companies House, showed that it had been struggling for some
time.

In the report, the directors said they would continue to support
the company in what they called a "difficult economic time",
despite negative shareholder funds of over GBP350,000, Commercial
Motor notes.

The liquidator's statement of company affairs showed the haulier
owed unsecured creditors a total of GBP422,772 on Oct. 8,
including GBP66,462 owed to HMRC, Commercial Motor discloses.

H C Herbert & Sons (Maesteg) is a South Wales haulier.


HEARTS OF MIDLOTHIAN: May Soon Start Administration Exit Process
----------------------------------------------------------------
Daily Record reports that the administrator running Hearts has
revealed the club could soon start the process of exiting
administration after he was given the go-ahead by one of their
major Lithuanian shareholders.

The stricken Tynecastle club has been unable to progress their
battle to escape administration while there was uncertainty over
the future of 50% stakeholder UBIG, itself declared bankrupt,
Daily Record relates.

According to Daily Record, the Kaunas-based investment firm --
once controlled by former Jambos owner Vladimir Romanov -- is
still waiting for a bankruptcy administrator to be appointed,
with a court hearing set for today, Oct. 24.

But now the man running Ukio Bankas -- another one-time Romanov
venture, also now insolvent -- has told Hearts administrator
Bryan Jackson of BDO he can go ahead and start the process of
negotiating a pence-in-the-pound Company Voluntary Arrangement
with the club's creditors, Daily Record notes.

Ukio Bankas, which owns 29.9% of the club and holds a floating
charge on the stadium, and UBIG are owed around GBP24 million,
with around GBP4.4 million owed to other companies, Daily Record
discloses.

BDO has already appointed fans' group the Foundation of Hearts as
preferred bidders but trouble-shooter Mr. Jackson said the club
are not out of the woods yet, Daily Record relays.

"This is positive news as it means that we can progress the CVA
process immediately by initiating meetings of the creditors and
shareholders.  We will also be able to begin the formal
acceptance of the Foundation of Hearts bid and legally agree
terms," Daily Record quotes Mr. Jackson as saying.  "I would urge
caution however that, although this is a further step in the
right direction, there is still some way to go.  There are a
number of issues to be clarified and concerns addressed but we
are at least progressing once more."

Hearts of Midlothian Football Club, more commonly known as
Hearts, is a Scottish professional football club based in Gorgie,
in the west of Edinburgh.


MARTYN LEISURE: In Administration, 300 Jobs at Risk
---------------------------------------------------
Richard Frost at Insider Media Limited News reports that Martyn
Leisure Breaks has fallen into administration putting 300 jobs at
risk.

Nick Cropper -- ncropper@zolfocooper.eu , Anne O'Keefe --
aokeefe@zolfocooper.eu , and Peter Holder --
pholder@zolfocooper.eu -- of restructuring specialists Zolfo
Cooper were appointed joint administrators of Hollybush Hotels,
trading as Martyn Leisure Breaks, on  Oct. 11, 2013.

Administrators have now confirmed the hotels will continue to
trade while a variety of options are considered, including
selling some or all of the business on a going concern basis,
according to Insider Media Limited News.

The report relates that all bookings and deposits made by
customers before the appointment will be honored.

In total, 300 members of staff are employed across all sites.

The report says that property consultancy GVA has been chosen as
agent for the sale of properties.

John Mitchell, director of hotels and leisure at GVA, said: "The
hotels are an interesting mix: Sand Bay Leisure Resort at Weston-
super-Mare is recognised as one of the best operated themed short
break holiday hotels in the country, welcoming over 60,000 guests
a year.  The Prince Regent and Russell Hotels on the Weymouth
seafront have magnificent views along the Jurassic coastline, and
Harrisons Hotel in Shepperton has excellent potential for a
variety of uses," the report adds.

Martyn Leisure Breaks owns a string of hotels in the South West.
The business owns and runs the Russell Hotel and the Prince
Regent Hotel at Weymouth in Dorset, Sand Bay Leisure Resort at
Weston-Super-Mare in Somerset, the Sherborne Hotel at Sherborne
in Dorset and Harrisons Hotel at Shepperton in Surrey.  Martyn
Leisure Breaks is based in Taunton, Somerset.


MID STAFFORDSHIRE: Administrators Given More Time by Monitor
------------------------------------------------------------
BBC News reports that administrators running Stafford Hospital
have been given more time by the health regulator to submit a
report on the future funding of services.

The Mid Staffordshire NHS Trust went into administration in April
after a report said it was not "clinically or financially
sustainable," according to BBC News.  The report relates that
Trust Special Administrators (TSA) were due to give a final
report to Monitor on Tuesday but have up to 40 more days.

The trust also runs Cannock Chase Hospital.

The report notes that the trust, which was at the center of the
public inquiry led by Robert Francis QC into poor standards of
care, was the first NHS foundation trust to be put into
administration.

A report by administrators in July recommended the trust should
be dissolved and its services provided by neighboring
organizations, the report relates.

                          'Funding Issue'

BBC News discloses that solution is based on, but not limited to,
the services identified by commissioners as essential.  However,
the report relates that there is no agreement on how to pay for
them.

A Save Stafford Hospital petition containing 50,000 signatures
was presented to the government in July, the report notes.

The report adds that Sue Hawkins, chair of the Support Stafford
campaign, said: "It has become increasingly evident that there is
a funding issue.  Indeed this is a national problem which needs
to be addressed to ensure safe and quality-driven care . . . .
We hope that the views of our communities have been reflected in
this final report. We as a community want acute services to be
delivered at Stafford Hospital."

The Mid Staffordshire NHS Trust provided healthcare for people in
Stafford, Cannock, Rugeley and the surrounding areas, covering a
total population of about 276,500 people.


NEWCASTLE BUILDING: Fitch Affirms 'BB+' Issuer Default Ratings
--------------------------------------------------------------
Fitch Ratings has affirmed the Long-term Issuer Default Ratings
(IDR) of Coventry Building Society (Coventry) at 'A'; Yorkshire
Building Society (Yorkshire) at 'BBB+'; Leeds Building Society
(Leeds) at 'A-'; Principality Building Society (Principality) at
'BBB+'; Skipton Building Society (Skipton) at 'BBB-' and
Newcastle Building Society (Newcastle) at 'BB+'. The Outlooks are
all Stable.

The Support Ratings (SR) and Support Rating Floors (SRF) of all
these building societies have been affirmed at '5' and 'No
Floor', respectively.

The six building societies are all mutual mortgage lenders in the
UK, whose lending is heavily focused on residential mortgage
loans and whose funding is mostly obtained from customers in the
form of saving deposits. They are small market players, however,
with a combined market share of the UK mortgage market of around
8% at end-2012.

Despite their small size and monoline nature, they are all
benefiting from gradual improvement in the UK operating
environment and recovery in the housing market. Mortgage lending
growth has been gathering pace, and loan performance has been
strong with low levels of arrears, helped by low, by historical
standards, household debt. A rise in housing prices has been
observed across various geographic regions, not just in London
and the South East.

Loan growth has been accompanied by a marked reduction in
customer funding costs over the past year, driven by the
secondary effects of the government's funding for lending scheme
(FLS). These reductions in wholesale and retail funding costs
have not been fully passed on to mortgage pricing and net
interest margins have seen improvement across the sector.

Nonetheless, the improvement in performance has been from a low
base, as all the societies' revenues have been squeezed by low
base rates and the lack of business/product diversification.
Overall profitability remains just moderate. While the mutual
nature of these societies, who are owned by their depositors and
borrowers (their "members"), means that their focus is not on
profit maximization, internal capital generation is an important
rating driver given the lack of an alternative capital instrument
available to them for raising loss-absorbing capital at times of
stress.

Fitch views exposure to commercial real estate (CRE) as a major
rating differentiator among societies given the outlook and
performance of this sector has remained weak. Some of the
societies have avoided expanding into this area prior to the
crisis and have thus not borne the losses and impairments written
against loans in this sector. Other ratings differentiators
include loan concentrations, exposure to specialist residential
loans (sub-prime, adverse, self-certified, second charge) as well
as large exposures to long-term, low yielding (but low risk)
housing association loans. Another important rating consideration
is exposure to higher loan-to-values (LTVs) and loans in negative
equity as these tend to indicate a higher risk appetite.

Liquidity at all these building societies had been built up
following the crisis and reached strong levels at end-2012;
however, buffers are expected to reduce over the next 12-18
months, as lending expands, regulatory restraints are lifted and
some liquidity moves off-balance sheet as a result of accessing
the FLS. Fitch does not expect loan to deposit ratios for the
societies to rise significantly above 100% in the medium-term as
FLS funding is not expected to replace retail funds, but rather,
other wholesale funding sources.

Capital ratios are sound and improving. Most of the societies
continue to report under the standardized method for credit risk
and thus allocate ample capital against residential mortgage
loans. Leverage at these societies is therefore also generally
low. The impact of high leverage on ratings is considered in
conjunction with loan and other asset concentrations.

Key Rating Drivers and Sensitivities - Support Rating and Support
Rating Floor

The SRs and SRFs of all the building societies included in this
commentary have been affirmed at '5' and 'No Floor', indicating
that Fitch believes that while support may be provided to each
individual building society, in case of need, we do not rely on
this support for our rating. All the Long-term IDRs of these
societies are therefore driven by their standalone performance as
indicated by their VR.

Coventry Building Society

Key Rating Drivers - IDRs and VR

Coventry's ratings reflect the low risk of its assets (in terms
of high fragmentation, solid performance, low average loan-to-
value ratios and insignificant commercial loan book) which
consist mostly of prime owner-occupied residential mortgages with
the remainder mostly buy-to-let with low LTVs. Profitability has
remained stable and is set to improve, as the pressure of low
base rates has been counterbalanced by strong growth in new
mortgage lending and the lower funding costs associated with the
secondary consequences of the FLS.

The society's coverage of impaired loans is low, relative to its
peers and to historical averages. This coverage level reflects
the low LTV of the impaired assets but exposes the society to
potential additional reserve requirements should property prices
fall further. Nonetheless, Fitch views Coventry's control of its
risk to be robust and well implemented.

The society's leverage (estimated by Fitch as the ratio between
tangible equity/tangible assets) is high: its regulatory capital
ratios are boosted by the low weightings assigned to its
residential mortgages under its Basel II internal ratings-based
approach. However, Fitch expects that leverage will reduce over
the medium-term, in line with any regulatory requirements to be
introduced. This will likely be achieved through higher
profitability and, possibly, a moderation of its loan volume
growth. Coventry has sufficient strategic flexibility to reduce
leverage faster if required.

Rating Sensitivities - IDRs and VR

Given Coventry's high ratings, an upgrade is not envisaged in the
short-to medium-term. Conversely, ratings could be downgraded if
its operational flexibility is constrained further by a lack of
available capital to fund its growth, if asset quality materially
worsens and if leverage does not fall to meet regulatory
standards.

Leeds Building Society

Key Rating Drivers - IDRs and VR

Leeds' ratings take into consideration its sound profitability
and capital generation, which it has been able to achieve by
maintaining low costs and its net interest margin at above
average levels, but also its weaker asset quality metrics than
those of peers. While its residential loan book is generally
performing well, the level of restructured loans is high (5.7% of
the loan book at end-2012) and loans in negative equity continue
to account for a high proportion of the book at end-H113 (13.2%
of loans with an LTV of over 90% at end-H113).

The society's exposure to commercial real estate continues to act
as a significant drag on profitability. Although the book is in
wind-down, Fitch expects loan impairment charges against this
portfolio to continue to account for a high proportion of the
total given the backdrop of a limited recovery expected in the
sector.

Rating Sensitivities - IDRs and VR

Leeds' ratings are sensitive to a continued deterioration in its
asset quality, whether in the form of increased negative equity,
higher restructured or loans in arrears, or increased
impairments. Should the proportion of restructured but not
impaired loans which are past due increase materially, the
ratings may be downgraded.

Yorkshire Building Society

Key Rating Drivers - IDRs and VR

Yorkshire's ratings reflect a low-risk business model, whose
performance and asset quality have recovered well from the
crisis. Its franchise was expanded significantly following its
recent acquisitions of Egg loans/savings, Chelsea Building
Society and Norwich & Peterborough Building Society. However,
operational plans to unify systems open it to more material
operational risk than some peers. Furthermore improvements in
performance following the FLS will be somewhat offset by higher
operational and compliance costs.

Yorkshire is more exposed than some of its higher-rated peers to
higher LTVs (mortgages with a LTV of over 90% accounted for 16%
of the book at end-2012). The society's impaired loans ratio and
arrears improved in 2012 and stabilized in H113. The society is
not significantly exposed to CRE loans.

Yorkshire's capitalization is robust and its core Tier 1 was
boosted further following a buyback of supplementary capital over
2012. Like other societies, Yorkshire is limited in its ability
to externally increase its capital base and must rely on retained
earnings.

Rating Sensitivities - IDRs and VR

Yorkshire's ratings could be upgraded following a continued
improvement in asset quality and profitability. Evidence of well-
managed and non-aggressive reduction of liquidity would also be
positive for its ratings. Conversely, its ratings would be
negatively affected by a continued increase in the negative
equity of its loan book or if the losses on its mortgage book
widen faster than expected, particularly taking into
consideration the high proportion of past due but not impaired
loans reported in H113 (4.9% of gross loans).

Principality Building Society

Key Rating Drivers - IDRs and VR

The ratings of Principality, Wales' biggest building society, are
underpinned by the generally low risk profile of its prime
residential loan book (57% of total gross loans at end-H113). The
ratings also reflect its resilient but moderate profitability,
which is highly dependent on the higher-yielding second-charge
book, which accounted for 79% of pre-tax profit in H113.
Its ratings are negatively affected by the higher risk inherent
in its commercial and second-charge lending books. Although
Principality does not plan to exit from these sectors, it will
continue to reduce the concentration inherent in the commercial
book and to manage the risk incurred on its second-charge book
with clearly defined on-balance sheet limits.

Rating Sensitivities - IDRs and VR

Principality's ratings are sensitive to a weakening of its asset
quality, either in the vulnerable commercial loan book or in the
higher risk second-charge book, or from the currently well
performing first-charge residential book. The ratings may also be
downgraded should the society review its capitalization plans as
a result of the recently acquired internal ratings-based (IRB)
status. Upside potential to the ratings is limited given the
small size and limited diversification.

Skipton Building Society

Key Rating Drivers - IDRs and VR

Skipton's ratings reflect the improving performance of its core
mortgage and savings business, and hence a reducing (albeit still
high) reliance on its large estate agency subsidiary. A strong
improvement in profits, seen in H113, has been the result of
lower funding costs, improved management of mortgage interest
rates, and stable market conditions. However, overall
profitability remains low.

The ratings also reflect the tail risk associated with its
exposure to high-risk areas (self-certified, sub-prime or near
prime sectors) through its subsidiaries Amber Homeloans Limited
and North Yorkshire Mortgages Limited. While these books are in
run-off and are expected to have seasoned, a high proportion is
interest-only, which may not fully reflect performance. Skipton
has limited exposure to CRE (4% of gross loans), and its loans to
this sector have been performing well so far. Nonetheless, the
sector remains vulnerable and the society may incur additional
impairment charges on its portfolio.

Rating Sensitivities - IDRs and VR

Skipton's ratings could be upgraded if the society's mortgage and
savings business continues to improve and capitalization grows in
line with plans. On the other hand, the ratings would come under
pressure from a worse-than-expected result at its specialist
mortgage subsidiaries or if its equity stakes in the investment
portfolio increase from current levels.

Newcastle Building Society

Key Rating Drivers - IDRs and VR

Newcastle's ratings reflect the small size of its equity given
the concentration present in its book, as a large commercial
default may have a disproportionate effect on the society. At
end-H113, the CRE loan book still accounted for 185% of Fitch
Core Capital, despite having been reduced year on year. The
concentration risk is exacerbated by its still weak internal
capital generation, in turn largely caused by a higher-than-
average exposure to a low-yielding Housing Association loan
portfolio.

Fitch views the recent increase in gross lending, following a
number of years of contraction, as a positive which, together
with the continued wind-down of its legacy loan book and cheaper
funding costs in the market, should lead to a modest improvement
in profitability.

Rating Sensitivities - IDRs and VR

Newcastle's ratings could be upgraded if loan concentrations
reduce and internal capital generation increases. The ratings,
however, will be under pressure if increased profitability is
generated by increasing its risk appetite.

Subordinated Debt and Hybrid Ratings (All Societies) - Rating
Drivers and Sensitivities

The ratings of all building societies' subordinated debt and
hybrid securities are notched down from their issuers' respective
VRs, reflecting a combination of Fitch's assessment of their
incremental non-performance risk relative to their VRs (up to
three notches) and assumptions around loss severity (one or two
notches).

All the UK societies' Permanent Interest Bearing Securities
(PIBS) are rated four notches below their respective VRs,
comprising two notches for their deep subordination and two
notches for incremental non-performance.

The ratings are broadly sensitive to the same considerations that
might affect their VRs.

Dated subordinated notes are rated one notch below their VRs,
reflecting their subordination.

Yorkshire's convertible debt is notched down twice from its VR as
its conversion trigger is considered to be low (5% regulatory
core Tier 1 capital) compared with the bank's current core Tier 1
ratio (13.7% at end-H113), Fitch therefore views the non-
performance of the instrument to be 'minimal'.

The rating actions are:

Coventry Building Society:

Long-term IDR affirmed at 'A'; Outlook Stable
Short-term IDR affirmed at 'F1'
Viability Rating affirmed at 'a'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
Senior long-term and short-term unsecured EMTN programme and
  notes affirmed at 'A'/'F1'
Subordinated perpetual notes (PIBS): affirmed at 'BBB-'

Leeds Building Society:

Long-term IDR: affirmed at 'A-' ; Outlook Stable
Short-term IDR: affirmed at 'F2'
Viability Rating : affirmed at 'a-'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
Senior long-term and short-term unsecured EMTN programme and
  notes: affirmed at 'A-'/'F2'
PIBS: affirmed at 'BB+'
Subordinated dated debt: affirmed at 'BBB+'

Yorkshire Building Society:

Long-term IDR affirmed at 'BBB+'; Outlook Stable
Short-term IDR affirmed at 'F2'
Viability Rating affirmed at 'bbb+'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
Senior unsecured debt affirmed and programme rating affirmed at
  'BBB+'/ 'F2'
Subordinated dated debt affirmed at 'BBB'
PIBS: affirmed at 'BB'
Convertible notes affirmed at 'BBB-'

Principality Building Society:

Long-term IDR affirmed at 'BBB+'; Outlook Stable
Short-term IDR affirmed at 'F2'
Viability Rating affirmed at 'bbb+'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
Senior unsecured debt and programme rating affirmed at 'BBB+/F2'
Subordinated dated debt: affirmed at 'BBB'
PIBS: affirmed at 'BB'

Skipton Building Society:

Long-term IDR: affirmed at 'BBB-' ; Outlook 'Stable'
Short-term IDR: affirmed at 'F3'
Viability Rating: affirmed at 'bbb-'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
Subordinated dated debt: affirmed at 'BB+'
PIBS: affirmed at 'B+'

Newcastle Building Society:

Long-term IDR affirmed at 'BB+'; Outlook Stable
Short-term IDR affirmed at 'B'
Viability Rating affirmed at 'bb+'
Support Rating affirmed at '5'
Support Rating Floor affirmed at 'No Floor'
Senior long-term and short-term unsecured EMTN programme and
  notes affirmed at 'BB+'/'B'
Subordinated Notes: affirmed at 'BB'


SPIRIT ISSUER: Fitch Assigns 'BB(EXP)' Ratings on 2 Note Classes
----------------------------------------------------------------
Fitch Ratings has assigned Spirit Issuer plc's class A6 and A7
notes expected ratings of 'BB(EXP)'. The Outlook is Stable.

Transaction Summary

The transaction is a proposed partial refinancing of Spirit's
GBP821.7 million (GBP1.25 billion at initial close) whole
business securitization (WBS). The new issuance is, at close,
expected to amount to GBP159.7m of senior secured notes (class A6
and A7) ranking pari-passu with the outstanding class A1-A5
notes. EBITDA leverage is 5.5x (7.2x lease adjusted), based on
the securitized group LTM EBITDA to August 2013 of GBP148.5
million. The transaction is a securitization of managed (640) and
tenanted (452) pubs located in the UK. An offer has been made to
exchange the A1 and A3 for two new classes, A6 and A7. Fitch has
assumed the maximum exchange of the class A1 and A3 notes at 70%
and 50% respectively, equivalent to a maximum of 19.4% of the
total outstanding notes being refinanced. Notably, any lower
take-up would be closer to the current transaction structure and
therefore viewed as incrementally stronger from a rating's
perspective. However, any higher take-up could have a negative
rating impact on all note tranches.

The aim of the partial refinancing is to reduce debt servicing
cost in the short-term, essentially by pushing back scheduled
amortization. This, however, may also allow more dividends to be
up-streamed by the borrowers until a potential refinancing (which
management is targeting in around five years' time).

The final ratings are contingent on the receipt of final
documents conforming materially to information already received.

Key Rating Drivers

The proposed partial refinancing of the transaction is viewed by
Fitch as slightly credit negative to broadly neutral from a
rating's perspective. This is because more dividends can be up-
streamed from 2014 to 2018, and lower free cashflow (FCF) debt
service coverage ratios (DSCR) are forecast in the medium- to
long-term under Fitch's base case, with more back-ended scheduled
amortization of the A6 and A7 tranches and higher expected cost
of debt. However, this is mitigated by the following:

   -- Fitch's base case FCF DSCR metrics still support 'BB'
rating. Overall, metrics are expected to be similar to those of
the original transaction. While medium- to long-term coverage
ratio pressures are greater, this is offset in the near term by
higher coverage. As a result, Fitch's base case FCF DSCR (minimum
of average and median coverage levels) is slightly stronger than
under the current transaction (1.31x vs. 1.27x currently).

   -- The deleveraging profile is similar to that under the
original transaction. Deleveraging speed is only slightly slower
than under the current structure (around 0.3x higher on average),
and should remain so until around 2030 when it re-aligns with the
original transaction under Fitch's base.

   -- New cash trapping arrangements partly mitigate potentially
higher up-streamed cash. To compensate for the reduced short-term
debt service, up-streaming of excess cash will be subject to
limitations with the restricted payment condition (RPC) based on
an increase in FCF DSCR to 1.45x (from 1.3x) and 50% trap of
excess cash if annual cash up-stream exceeds GBP30 million (as
long as the Ambac guarantee remains in place). Under Fitch base
case, cash up-streaming over the period 2014 to 2018 (inclusive)
is effectively limited to around 40% (i.e. around GBP160 million,
around 25% greater than under the current structure) of the total
projected available excess cash despite the RPC not being
breached. Once the sweep is engaged (from September 2018
onwards), no cash up-stream will be permissible while any class
A6 and A7 notes are outstanding.

   -- Cash sweep mitigates rate exposure. Fitch expects the
notional of the interest rate swaps to fall below the outstanding
of the floating rate notes over time given that interest rate
swaps hedging the floating rate notes remain unchanged while the
notes' amortization is effectively being postponed. Under Fitch's
base case such under-hedging reaches a maximum of around GBP90
million in 2019 (around 12% of principal outstanding). However,
the cash sweep mitigates this risk as prepayment of the A6 and A7
notes will reduce the under-hedging (eliminating it by around
2030 under Fitch's base case). Notably, the relevant swaps'
notional amounts will be broken if the prepayment of class A6 and
A7 notes creates or increases an over-hedged position.

Rating Sensitivities

Any significant changes in operating performance resulting from
the impact of the on-going challenging industry fundamentals and
weak UK economic environment leading to a move in the forecast
metrics below or above the criteria recommended 'BB' category
ranges of 1.25x-1.40x (on a managed/tenanted weighted basis) may
affect the ratings.

An exchange of more than 70% of the A1 and 50% of the A3 notes
for the new class A6 and A7 notes could also have a negative
rating impact on all outstanding note tranches.

Summary Of Credit

Spirit is a whole business securitization of 640 managed pubs and
452 leased and tenanted pubs located across the UK owned and (in
the case of the managed pubs) operated by Spirit Pub Company plc
and its subsidiaries.

The rating actions are as follows:

  GBP101.3m Class A6 notes due 2036: assigned 'BB(EXP)'; Outlook
  Stable

  GBP58.4m Class A7 notes due 2036: assigned 'BB(EXP)'; Outlook
  Stable


TAYLOR LEGAL: In Administration, Ceases Trading
-----------------------------------------------
The Law Society Gazette reports that Taylor Legal has ceased
trading after failing to secure professional indemnity insurance.

East Midlands firm Burton & Burton confirmed it has bought almost
3,000 live files from the firm, which went into administration,
according to The Law Society Gazette.  The report relates that
the acquisition includes around 100 personal injury files and
2,700 payment protection insurance cases.

David Wilson -- david.wilson@dfwassociates.co.uk -- of DFW
Associates was appointed administrator after Taylor Legal was
unable to secure the PII.  The report relates that it has been
reported that six people will lose their jobs as a result of the
closure.

In total, the report notes that 219 firms are confirmed to have
missed out on securing indemnity insurance by the renewal
deadline at the start of this month.  Thirty have since secured
PII, the report relates.

The report discloses that firms receive 90 days further cover
from their old insurer while they try to obtain a new policy.
Those that cannot find cover must close at the end of those 90
days, the report adds.

A firm may continue to practice normally for the first 30 days
while it attempts to obtain a qualifying insurance policy, but
after that may only work on existing instructions, the report
says.

Already this month, London firms Harris Cartier and Manches have
been sold off after entering administration, with more likely to
follow in the coming weeks, the report notes.

North-west firm Taylor Legal specialized in personal injury.


WHITWORTH HALL HOTEL: In Administration, Seeks Buyer
----------------------------------------------------
The Northern Echo reports that brides and grooms-to-be were left
reeling after news broke that Whitworth Hall Hotel had gone into
administration.

Administrators appointed to run Whitworth Hall Hotel, near
Spennymoor in County Durham, are confident a buyer will be found
for the popular wedding venue, according to The Northern Echo

The report notes that joint administrators Andrew Haslam --
andrew.haslam@begbies-traynor.com -- and Gary Lee --
gary.lee@begbies-traynor.com of Begbies Traynor, are optimistic
about the hotel's future.  The report relates that they have
confirmed business will continue as normal and that all 40
members of staff will retain their jobs.

Whitworth Hall Hotel is a historic country house hotel.



===============
X X X X X X X X
===============


* Fitch Says Credit Funds Investor Redemption Risk Looming
----------------------------------------------------------
Fitch Ratings says in a new report that credit funds face growing
risk of investor redemption, amid uncertainty over the Federal
Reserve's plan for tapering and disappointing returns as credit
performance drivers see their role diminish. Repricing risk,
which is linked to redemption, is also rising for credit funds.

Less than 10% of credit fund flows since end-2008 have been
reversed since June 2013, when financial markets were sold off
globally. Redemption risk is particularly acute for large high
yield (HY) retail funds, which provide daily liquidity and, in
certain cases, own a substantial portion of select issuers.

Looking forward, credit fund managers have positioned their
portfolios for a continued, gradual market normalization, and, in
the shorter term, for range trading markets, increased volatility
around economic releases and central banks communications, and a
potential increase in relative value opportunities fuelled by
company-specific stories (M&A and share buybacks for example).

The current market, which is characterized by low yields, spreads
and default rates, nevertheless leaves credit fund managers with
limited room for exploiting credit performance drivers. Funds'
future performance is constrained by limited potential for
further spread compression, by the normalization of relative
value discrepancies (eg. core and periphery, financials / non-
financials, US / Europe) and by the fact that bond pricing
variation between issuers remains low.

Overall global credit fund performance has been lackluster in the
year to date, as higher rates reduce overall total return.
European HY funds, like in 2012, still stand out with the best
returns (3.4% year to 18 October). By contrast, USD investment
grade funds suffered the most because of duration (-5.4%).
Absolute return credit experienced drawdowns during the sell-off
in May-June which has left them in negative territory so far this
year. Performance discrepancies between global credit funds
increased in 2013 relative to 2012, highlighting differences in
funds' overall exposures to credit and duration.

Fitch published its credit fund sector research, combining a
summarized overview of the sector's developments with fund peer
group data. Fitch's fund peer groups include best-selling, best
performing and largest credit funds as well as Fitch's rated
funds, domiciled in Europe and classified as cross-border.

Fund sector research is part of Fitch's on-going commitment to
fund research and ratings. Fitch's Fund Quality Ratings combine
Fitch's experience in qualitative fund analysis with rankings and
performance data from Lipper, a Thomson Reuters company. Fitch's
Fund Quality Ratings offer an independent, forward-looking
assessment of a fund's key performance and risk attributes and
consistency of longer-term returns, relative to peer group or
benchmarks. The ratings focus on the fund manager's investment
process, key fund performance drivers, risk management, and the
quality of the fund's operational infrastructure.


* Fitch: Spec. Grade Rating on Sub. Tranches Still on Neg Outlook
-----------------------------------------------------------------
Fitch Ratings says in its latest European Leveraged Loan CLO
Tracker that CLOs continued to see stable ratings and strong
performance since October 2012.

For outstanding Fitch-rated CLOs, 79% of tranches have either
remained investment grade or were paid in full or withdrawn.
Since last October, there have been no downgrades for any
investment-grade tranches and two tranches have been paid in
full. Most speculative grade ratings on subordinated tranches
remain on Negative Outlook due to refinancing risk on the loans
which may lead to rating volatility.

Underlying assets in the CLO portfolios have also seen an
improvement. The credit quality of the leveraged loan universe
has improved with the percentage of loans 'B-*' or below
declining to 42% in September 2013 from 48% in 2012. The
improvement in credit quality can be attributed to a change in
portfolio mix, with an increased number of larger issuers and an
extension of maturities. In addition, the proportion of assets in
CLO portfolios with credit opinions of 'CCC*' or below dropped to
6.6% as of September 2013, from 9.5% as of October 2012, mainly
due to defaults and trading.

Portfolios remain well diversified across industries and
countries. There has not been any major shift in portfolio
composition. Exposure to peripheral eurozone countries (Greece,
Italy, Ireland, Portugal and Spain) remains low at 11.5% on
average.

The annual default rate has slightly increased to 4.2%, but
remains below the long-term average of 4.8% for high yield debt.
Loan issuers are helped by low interest rates and continued
willingness of lenders to agree to amend and extend. Fitch-rated
CLOs show an average net loss - defined as the difference between
asset par and liabilities - of 1.64%. This has increased as a
result of additional defaults but remains low overall.

For Fitch-rated CLOs, 60% of have now passed their reinvestment
period. By end-2014 the reinvestment period will be over for all
CLOs. Reinvestment after the reinvestment period is permitted but
subject to criteria that vary between transactions. CLOs with a
liability rating criterion on the senior class have deleveraged.

The cheap cost of funding in older vintage CLOs means managers
are incentivized to keep funds at maximum leverage. Limited
constraints on the amend-and-extend boom allow managers to keep
funds leveraged after reinvestment. Only high yield refinancing
would cause deleveraging post reinvestment, which may then
trigger an equity call. Up to 34% of CLO obligations have been
subject to amend and extend, resulting in rising portfolio
weighted-average life (WAL) and weighted-average spread (WAS).

Fitch has credit opinions and Recovery Ratings (RR) on 273
European corporates, representing coverage of over 90% of
eligible European CLO assets.


* Upcoming Meetings, Conferences and Seminars
---------------------------------------------
Nov. 1, 2013
   AMERICAN BANKRUPTCY INSTITUTE
      NCBJ/ABI Educational Program
         Atlanta Marriott Marquis, Atlanta, Ga.
            Contact:   1-703-739-0800; http://www.abiworld.org/

Dec. 2, 2013
   BEARD GROUP, INC.
      19th Annual Distressed Investing Conference
          The Helmsley Park Lane Hotel, New York, N.Y.
          Contact:   240-629-3300 or http://bankrupt.com/

Dec. 5-7, 2013
   AMERICAN BANKRUPTCY INSTITUTE
      Winter Leadership Conference
         Terranea Resort, Rancho Palos Verdes, Calif.
            Contact:   1-703-739-0800; http://www.abiworld.org/


                            *********


Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par.  Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable.  Those sources may not,
however, be complete or accurate.  The Monday Bond Pricing table
is compiled on the Friday prior to publication.  Prices reported
are not intended to reflect actual trades.  Prices for actual
trades are probably different.  Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind.  It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.

Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets.  At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short.  Don't be fooled.  Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets.  A company may establish reserves on its
balance sheet for liabilities that may never materialize.  The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.

A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged.  Send announcements to
conferences@bankrupt.com

Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals.  All titles are
available at your local bookstore or through Amazon.com.  Go to
http://www.bankrupt.com/booksto order any title today.


                            *********


S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Ivy B. Magdadaro, Frauline S. Abangan and Peter
A. Chapman, Editors.

Copyright 2013.  All rights reserved.  ISSN 1529-2754.

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.

The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail.  Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each.  For subscription information,
contact Peter Chapman at 215-945-7000 or Nina Novak at
202-241-8200.


                 * * * End of Transmission * * *