/raid1/www/Hosts/bankrupt/TCREUR_Public/131115.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Friday, November 15, 2013, Vol. 14, No. 227
Headlines
F R A N C E
ATELIERS PLEYEL: Halts Production Due to Recurring Losses
G E R M A N Y
DECO 9: Fitch Lowers Ratings on Five Note Classes to 'Csf'
HESS AG: 2012 Pretax Profit Overstated by Nearly EUR45 Million
LOEWE AG: Aims to Finalize Investor Talks in December
G R E E C E
LITHOS MORTGAGE: Fitch Maintains Watch Evolving on 3 Debt Classes
I R E L A N D
SIAC CONSTRUCTION: Owners Tap Investec to Put Together Rescue Bid
ST PAUL'S CLO III: S&P Assigns 'Bsf' Rating to Class F Sub. Notes
I T A L Y
ALITALIA SPA: Air France Refuses to Contribute Fresh Funds
L A T V I A
LIEPAJAS METALURGS: Liepaja Court Launches Insolvency Process
N E T H E R L A N D S
D.E MASTER: S&P Cuts Corp Credit Rating to 'B+'; Outlook Positive
HERTZ HOLDINGS: S&P Assigns 'B' Issue-Level Rating to Sr. Notes
OAK LEAF: S&P Assigns 'B+' Corp. Credit Rating; Outlook Positive
PROSPERO CLO I: Moody's Affirms Caa2 Rating on Class D Notes
P O R T U G A L
BRISA CONCESSAO: Moody's Affirms 'Ba2' Sr. Secured Notes Rating
R U S S I A
MECHEL OAO: Expects Agreement on Covenant Holiday in Coming Weeks
VNESHPROMBANK: Moody's Rates Loan Participation Notes 'B2'
S P A I N
FAGOR: Commences Insolvency Proceedings After Debt Deal Fails
S W E D E N
SSAB AB: S&P Revises Outlook to Neg. & Affirms 'BB/B' Ratings
T U R K E Y
KUVEYT TURK: Fitch Retains 'bb-' Viability Rating
U K R A I N E
UKRAINE: Fitch Cuts LT Currency IDRs on 11 Companies to 'B-'
U N I T E D K I N G D O M
20TWENTY INDEPENDENT: Enters Voluntary Liquidation
ARCK LIMITED: Ex-Directors received GBP4MM From Scheme
ARGON CAPITAL: Moody's Confirms 'B1' Rating on GBP750MM Secs.
JKL (WAKEFIELD): Liquidators Auction Off Luxury Cars
MARSDEN SMITH: Bought Out of Administration; 15 Jobs Secured
PRECISE MORTGAGE: S&P Assigns Prelim. 'BB+' Rating to Cl. E Notes
SANTANDER ASSET: S&P Assigns 'BB/B' LT Counterparty Ratings
X X X X X X X X
EUROPE: S&P Withdraws Ratings on 16 European CDO Tranches
* Moody's: EMEA Telecom Service Sector Remains on Neg. Outlook
* Peter Bache & BSVA Staff Join GA Europe Valuations
* BOOK REVIEW: The Oil Business in Latin America: The Early Years
*********
===========
F R A N C E
===========
ATELIERS PLEYEL: Halts Production Due to Recurring Losses
---------------------------------------------------------
Nadya Masidlover and Inti Landauro at The Wall Street Journal
reports that Ateliers Pleyel said late Tuesday that it was
ceasing production at its workshop in the Parisian suburb of
Saint-Denis.
According to the Journal, France's only remaining piano maker,
which has built instruments for composers from Chopin to
Stravinsky, said it would lay off its 14 staffers because of
"recurring losses and weak business."
Pleyel's curtain call marks a new blow to France's craftsmanship
sector, which is suffering in the face of global competition, and
adds to the string of recent layoffs announced in the country,
the Journal notes.
Last year, Pleyel recorded a loss of EUR1.14 million (US$1.53
million) on revenue of around EUR728,000, the Journal says,
citing documents filed with the local commercial court, the
Journal recounts.
The Journal relates that Pleyel Chairman Bernard Roques said
"alternative solutions are being sought out." The company will
continue to sell pianos from its stock of finished instruments,
the Journal states.
Ateliers Pleyel was one the world's oldest manufacturers of
pianos.
=============
G E R M A N Y
=============
DECO 9: Fitch Lowers Ratings on Five Note Classes to 'Csf'
----------------------------------------------------------
Fitch Ratings has affirmed DECO 9 - Pan Europe 3 plc's (DECO 9)
class A to D notes and downgraded the others as follows:
EUR224.1m class A2 (XS0262561276) affirmed at 'BBsf'; Outlook
Stable
EUR39.0m class B (XS0262561946) affirmed at 'Bsf'; Outlook
Negative
EUR37.6m class C (XS0262562753) affirmed at 'CCCsf'; assigned
Recovery Estimate (RE) 30%
EUR15.2m class D (XS0262563215) affirmed at 'CCsf'; assigned
RE0%
EUR21.5m class E (XS0262563728) downgraded to 'Csf' from
'CCsf'; assigned RE0%
EUR34.2m class F (XS0262564452) downgraded to 'Csf' from
'CCsf'; assigned RE0%
EUR6.7m class G (XS0262565004) downgraded to 'Csf' from 'CCsf';
assigned RE0%
EUR10.0m class H (XS0262565939) downgraded to 'Csf' from
'CCsf'; assigned RE0%
EUR4.8m class J (XS0262566234) downgraded to 'Csf' from 'CCsf';
assigned RE0%
Key Rating Drivers:
The affirmation of the class A to D notes and the revision of the
Outlook on the class A2 notes to Stable reflects the significant
deleveraging of the Dresdner Office Portfolio loan due to the
borrower selling assets to meet the amortization targets set
following the loan extension in 1Q13. The current loan-to-value
ratio (LTV) is below 30% and with expectations of further asset
sales and cash sweep, full repayment of the loan is expected.
The Negative Outlook on the class B notes, the downgrade of the
class E to J notes and the revision of the class C RE to RE30%
from RE90% is driven by partial sale proceeds of collateral for
the Treveria A-loan being below the 2011 valuation, with little
improvement in market conditions expected for the remaining
assets. The Treveria A-loan is the largest loan in the portfolio
(making up 58% of the pool balance), and is a 50% syndicated
piece from the EUR391.5m Treveria A-loan, the other half of which
is syndicated in the defaulted Europrop (EMC) S.A. (Compartment
1) CMBS (where it is known as the Sunrise loan). 22 properties
had been sold by the July interest payment date, realizing
EUR127 million in gross sales proceeds compared with an allocated
loan amount of EUR165 million and a 2011 valuation of EUR141
million. A further six assets are notarized at a gross sales
price of EUR41 million against an allocated loan amount of EUR65
million and a 2011 valuation of EUR44 million. The remaining 21
assets are either in various stages of due diligence or being
marketed.
The PGREI loan is secured by retail warehouses in the suburbs and
smaller German cities. It matures in July 2014. Asset performance
has been stable over the past few years, but higher rental yields
have seen values fall for similar properties in Germany. The
collateral has not been revalued since closing in 2006, which
explains the current LTV of 75% (below Fitch's estimate of 130%).
Rating Sensitivities:
If market conditions for secondary German property remain weak,
recoveries on the Treveria loan may fall short of projections
while the value of the PGREI loan assets may be depressed beyond
Fitch's expectations. This outcome will increase the likelihood
of a downgrade of the class B notes.
Fitch's 'Bsf' case note principal repayments amount to EUR275m.
HESS AG: 2012 Pretax Profit Overstated by Nearly EUR45 Million
--------------------------------------------------------------
Maria Sheahan at Reuters reports that Hess AG said on Wednesday
auditors found the company's financial accounts for 2007 through
2012 overstated pretax profit by a total of nearly EUR45 million
(US$60.5 million).
Hess filed for insolvency in February, only months after making
its stock market debut, saying a fraud investigation had
scuppered its chances of raising urgently-needed funds, Reuters
recounts. It said damages would now have paid to investors, who
bought shares in the company based on false accounts, Reuters
relates.
Hess AG is a German street light maker.
LOEWE AG: Aims to Finalize Investor Talks in December
-----------------------------------------------------
Claudia Rach at Bloomberg News reports that Loewe AG Chief
Executive Officer Matthias Harsch said in an interview the
company aims to finalize talks with remaining two to three
financial investors in December and return to normal operating
business from Jan. 1.
According to Bloomberg, Mr. Harsch said the financial investors
are from Europe and have experience in brands. He didn't
elaborate further, Bloomberg notes.
As reported in the Troubled Company Reporter-Europe on Oct. 2,
2013, Reuters related that Loewe filed for insolvency on Oct. 1
and needs to find an investor before the end of the year to avert
closure. Loewe fell into difficulties after it failed to keep up
with mass-market rivals such as Samsung and LG Electronics, and
struggled to cope with a slide in the average price of TV sets,
Reuters disclosed. It filed for protection from creditors'
demands in July to give it breathing space while it sought an
investor and restructured the company, Reuters noted.
Loewe AG is a German high-end television maker.
===========
G R E E C E
===========
LITHOS MORTGAGE: Fitch Maintains Watch Evolving on 3 Debt Classes
-----------------------------------------------------------------
Fitch Ratings is maintaining Lithos Mortgage Financing PLC on
Rating Watch Evolving (RWE) as follows:
Class A (ISIN XS0250309159) 'B-sf'; remains on RWE
Class B (ISIN XS0250310322) 'B-sf'; remains on RWE
Class C (ISIN XS0250310678) 'B-sf'; remains on RWE
Lithos is a true sale securitization of Greek residential
mortgages originated by the former Emporiki Bank which has
subsequently been purchased by and merged into Alpha Bank AE
(B/B/Stable).
Key Rating Drivers:
-- Reserve Fund Currently Not Providing Credit Enhancement
The reserve fund continues to fail to make provision for
defaulted loans despite the transaction documentation explicitly
stating that the reserve fund be used for this purpose. Fitch has
found that the reserve is not being correctly applied to 'total
available funds' in accordance with the transaction
documentation. As such, the amortization profile of the
transaction has been distorted and the reserve fund is,
therefore, failing to provide credit support to the notes.
The reserve fund remains fully funded at EUR18 million and so the
transaction is not in breach of the sequential amortization
trigger. Therefore the transaction is incorrectly amortizing on a
pro rata basis.
-- Fitch Awaits Further Information
Fitch has been in contact with the cash manager, Bank of New York
Mellon and the originator. Both parties are assessing their next
move in relation to the reserve fund anomalies. Fitch expects to
receive further information in the coming weeks and has therefore
maintained the Rating Watch Evolving on the rated notes.
Rating Sensitivities:
-- Failure to provide information in a timely manner about how
funds are to be allocated in this transaction may cause Fitch
to assume that the reserve fund will not be available to
offset losses which would result in a downgrade of the rated
notes.
-- Further rating changes to the Greek sovereign IDR or Country
Ceiling may result in rating action on associated tranches.
-- A change in legislation that has a material effect on
mortgage borrower behavior or repossession activity would
cause the agency to revise its assumptions and could have a
negative effect on the ratings.
=============
I R E L A N D
=============
SIAC CONSTRUCTION: Owners Tap Investec to Put Together Rescue Bid
-----------------------------------------------------------------
Donal O'Donovan at Irish Independent reports that SIAC's
long-time family owners and former managers have tapped Investec
to put together a rescue bid to buy the business back out of
examinership.
The 100-year-old SIAC Construction group was forced to apply to
the High Court for examinership on Oct. 23 after running up big
losses on Polish road contracts and as a result of the
construction downturn here, Irish Independent recounts.
SIAC Group is two-thirds owned by the Feighery family, who have
now teamed up with former managers to prepare an investment offer
to bring the business back out of examinership, Irish Independent
notes.
The shareholders, who had pumped around EUR20 million to support
the business before it sought examinership, have further capital
available for a planned rescue offer that would see them retain a
majority shareholding in SIAC, Irish Independent relates.
They have tapped corporate financial advisers Investec to source
minority investors to help finance the bid, Irish Independent
discloses.
The High Court was told this month that between EUR5 million and
EUR8 million is needed to finance SIAC's exit from examinership
on a sustainable basis, Irish Independent recounts.
Investec, Irish Independent says, is thought to be focusing its
search for backers on the pool of international investors eyeing
Ireland for opportunities to benefit from the anticipated
recovery here.
Trade and financial backers are being sounded out about the
investment, Irish Independent states.
If the bid succeeds, the plan is to back the current SIAC
management and focus the business on its core civil engineering
brand, Irish Independent says.
Michael McAteer of Grant Thornton was appointed as examiner of
SIAC in October, Irish Independent relays.
Earlier this month, he told the High Court that six parties had
expressed an interest in investing in the business, Irish
Independent relates.
It is understood that Investec and the Feighery family have not
yet tabled their investment proposal to Mr. McAteer, Irish
Independent notes.
He has indicated that non-binding, indicative bids should be on
the table by Nov. 18, Irish Independent states.
SIAC Construction is an Irish building engineering company.
ST PAUL'S CLO III: S&P Assigns 'Bsf' Rating to Class F Sub. Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned preliminary ratings
to St. Paul's CLO III Ltd.'s class A, B, C, D, E, and F notes. At
closing, St. Paul's CLO III will also issue unrated subordinated
notes.
"Our preliminary ratings address the timely payment of interest
and principal on the class A and B notes, and the ultimate
payment of interest and principal on the class C, D, E, and F
notes," said S&P.
CAPITAL STRUCTURE
Notional
Class (mil. EUR) Interest Deferrable OC(%) Rating
A 326.7 6mE+1.45% No 40.49 AAA (sf)
B 64.9 6mE+2.00% No 28.67 AA (sf)
C 32.4 6mE+3.00% Yes 22.77 A (sf)
D 26.4 6mE+4.15% Yes 17.96 BBB (sf)
E 33.0 6mE+5.50% Yes 11.95 BB (sf)
F 15.4 6mE+6.00% Yes 9.14 B (sf)
Subordinated 57.7 N/A N/A 0.00 NR
6mE - Six-month Euro Interbank Offered Rate (EURIBOR).
OC - Overcollateralization = [portfolio target par amount -
tranche notional (including notional of all senior
tranches)]/portfolio target par amount.
NR - Not rated.
N/A - Not applicable.
"We understand from the investment manager that St. Paul's CLO
III will purchase about 35% of its target portfolio via trades in
the open market, and 65% from ICG EOS Loan Fund I Ltd. The assets
from EOS Loan Fund I that cannot be settled on St. Paul's CLO
III's closing date will be subject to a participation, until they
can be elevated to full assignments. The investment manager
expects that all assets purchased from EOS Loan Fund I will have
settled before St. Paul's CLO III's effective date," S&P said.
"At the end of the ramp-up period, we understand that the
portfolio will represent a well-diversified pool of corporate
credits, with a fairly uniform exposure to all of the credits.
Therefore, we have conducted our credit and cash flow analysis by
applying our 2009 corporate cash flow collateralized debt
obligation criteria."
"In our cash flow analysis, we assumed a portfolio weighted-
average maturity of 6.04 years. We used a portfolio target par
amount of EUR549.0, assuming that 10% of the portfolio comprises
fixed-rate assets. We used the covenanted weighted-average spread
and weighted-average coupon (4.20% and 6.00% respectively), and
the covenanted weighted-average recovery rates at each rating
level."
"The portfolio's replenishment period will end 4.0 years after
closing."
Citibank, N.A., London Branch, will be the bank account provider
and custodian. The issuer will enter into asset swaps to hedge
the foreign exchange risk arising from non-euro-denominated
assets. At closing, S&P anticipates that the participants'
downgrade remedies will be in line with its current counterparty
Criteria.
At closing, S&P understands that the issuer will be in line with
its bankruptcy-remoteness criteria under its European legal
criteria.
"Following our analysis of the credit, cash flow, counterparty,
operational, and legal risks, we consider that our preliminary
ratings are commensurate with the available credit enhancement
for each class of notes," S&P said.
St. Paul's CLO III is a cash flow collateralized loan obligation
(CLO) transaction securitizing a portfolio of primarily senior
secured loans made to speculative-grade European corporates.
Intermediate Capital Managers Ltd. will manage the transaction.
RATINGS LIST
Preliminary Ratings Assigned
St. Paul's CLO III Ltd.
EUR556.5 Million Secured And Secured Deferrable Floating-Rate
Notes And Subordinated Notes
Class Prelim. Prelim.
rating amount
(mil. EUR)
A AAA (sf) 326.7
B AA (sf) 64.9
C A (sf) 32.4
D BBB (sf) 26.4
E BB (sf) 33.0
F B (sf) 15.4
Subordinated NR 57.7
NR-Not rated.
=========
I T A L Y
=========
ALITALIA SPA: Air France Refuses to Contribute Fresh Funds
----------------------------------------------------------
Gilles Castonguay and David Pearson at The Wall Street Journal
report that Alitalia SpA's future was thrown into doubt Thursday
after its biggest shareholder Air France-KLM SA said it wouldn't
contribute to raising EUR300 million (US$404.6 million) in fresh
funds.
Alitalia presented a revised restructuring plan entailing at
least EUR200 million in cost cuts late Wednesday, but the
proposal failed to convince its French-Dutch partner to
contribute EUR75 million to the capital increase that it
desperately needs to keep flying, the Journal relates.
Late Wednesday, Alitalia's board postponed by nearly two weeks to
Nov. 27 the deadline for the capital increase to buy more time to
negotiate with Air France-KLM, which had set tough conditions in
return for the investment, the Journal relays.
But the postponement and the plan failed to overcome Air France-
KLM's biggest concern: Alitalia's net financial debt of nearly
EUR1 billion, the Journal discloses. Air France-KLM has been
pushing for a restructuring of the debt, but Alitalia's major
creditors have so far refused, the Journal notes.
"Although the industrial restructuring portion of the plan
presented yesterday goes in the right direction . . . the
necessary financial restructuring measures aren't in place," the
Journal quotes Air France-KLM as saying.
Air France-KLM is grappling with its own precarious finances, and
it can ill afford to shoulder those of its loss-making Italian
partner, the Journal discloses. Air France-KLM's top executives
have been irritated that Alitalia's creditors - led by UniCredit
SpA and Intesa Sanpaolo refuse to share the pain involved in
reviving the airline, the Journal says, citing a person familiar
with the situation.
Air France-KLM nevertheless expressed support for Alitalia,
saying it intends to remain a "loyal and serious" partner, the
Journal relates. According to the Journal, some analysts have
suggested that Air France-KLM could be playing hardball with an
eye to returning to the table later if the banks concede on a
restructuring. But an Air France-KLM spokesman said that was
unlikely, the Journal notes.
Although its 25% stake will be diluted by not participating in
the capital increase, Air France-KLM said it will convert
EUR24 million of convertible debt to keep its holding between 5%
to 10%, thus allowing it to hold on to one of its four seats on
the board, the Journal relays.
So far, Alitalia has received EUR136 million worth of commitments
to the capital increase, the Journal discloses. But Alitalia
needs Air France-KLM not only to recover from its state of near
insolvency but also to become part of an international group big
enough to survive in the fiercely competitive industry, the
Journal states.
Even after its 2008 rescue by a group of private investors, the
Italian airline has continued to lose money and accumulate debt
as it has lost ground in its home market to discount airlines and
high-speed trains. It has done no better overseas, the Journal
recounts. In the first half of 2013, its net loss widened to
EUR294 million on lower revenue of EUR1.62 billion, the Journal
relates.
Alitalia's latest restructuring plan entails a reduction in the
number of medium-haul planes in its fleet while maintaining the
same number of flying hours and increasing its international and
intercontinental flights, the Journal discloses. No further
details of the plan were released, although analysts expect the
airline to cut thousands of jobs, the Journal states.
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%.
===========
L A T V I A
===========
LIEPAJAS METALURGS: Liepaja Court Launches Insolvency Process
-------------------------------------------------------------
The Baltic Times reports that the Liepaja Court has a launched
insolvency process against the financially-troubled Liepajas
Metalurgs.
The court has decided to halt the companies legal protection
process and launch an insolvency process against it, The Baltic
Times relates.
Liepajas Metalurgs legal protection administrator, Haralds
Velmers, has been appointed the company's insolvency
administrator, The Baltic Times discloses.
Mr. Velmers' insolvency petition was submitted to the court on
Nov. 4, The Baltic Times recounts.
According to The Baltic Times, if "Liepajas metalurgs" is
declared insolvent, it will be placed under Velmers' supervision,
eventually leading to a deed of sale in six months following the
court's ruling.
The Baltic Times notes that Mr. Velmers told the Nozare.lv the
insolvency designation will "open new opportunities for the
company itself, and -- in the long run -- a majority of its
employees."
Liepajas metalurg has halted production, The Baltic Times relays.
In July, the State Treasury repaid from the state budget the
principal amount of the loan owed to the Italian bank UniCredit
by Liepajas metalurgs EUR67,465,056 or LVL47,414,711, The Baltic
Times discloses.
Liepajas Metalurgs is a Latvian metallurgical company.
=====================
N E T H E R L A N D S
=====================
D.E MASTER: S&P Cuts Corp Credit Rating to 'B+'; Outlook Positive
-----------------------------------------------------------------
Standard & Poor's Ratings Services said that it has removed from
CreditWatch negative and lowered to 'B+' from 'BBB' its long-term
corporate rating on D.E MASTER BLENDERS 1753 B.V. (DEMB), a
Netherlands-based coffee manufacturer. The outlook is positive.
"At the same time, we withdrew our 'A-2' short-term corporate
credit rating on DEMB."
"The rating action follows the completed 95% acquisition of DEMB
by an investor group led by Joh. A. Benckiser (JAB) through the
acquisition holding Oak Leaf B.V. (Oak; B+/Positive/--). In line
with our CreditWatch placement of July 5, 2013, we are equalizing
the ratings on DEMB and Oak. Our 'B+' corporate credit rating on
DEMB reflects our rating on Oak, its acquisition holding (see
"Oak Leaf B.V. Assigned 'B+' Rating After Acquisition Of D.E
MASTER BLENDERS 1753; Outlook Positive," published Nov. 12, 2013,
on RatingsDirect)."
"We understand there is EUR29 million of subsidiary debt at the
acquisition date, with restrictions in place preventing DEMB from
raising debt other than that allowed under the predefined debt
incurrence carve-outs from the bank loan. We expect Oak and DEMB
to merge once the investor group has acquired the remaining 5% of
shares through a statutory squeeze-out process. Going forward,
consolidated accounts will be at the level of Acorn B.V., the
parent of Oak Leaf B.V."
"The outlook is positive, reflecting our view that credit metrics
will improve in the next 12 months thanks to strengthening
operating performance at DEMB, notably due to lower green coffee
prices, cost efficiencies, and efficient working capital
management."
"We could upgrade DEMB if it widened its EBITDA margin to about
20% and if we saw a sufficient deleveraging path as of the end of
fiscal 2014."
"We could revise our outlook to stable if DEMB was unable to at
least stabilize its operating performance, or if it failed to
start deleveraging in line with its targets."
HERTZ HOLDINGS: S&P Assigns 'B' Issue-Level Rating to Sr. Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' issue-level
rating to Hertz Holdings Netherlands B.V.'s senior notes due
2018.
"The recovery rating is '5', indicating our expectation that
lenders would receive modest (10%-30%) recovery or principal in
the event of a payment default. Hertz Corp., Hertz Global
Holdings Inc.'s major operating subsidiary, will guarantee the
notes. Hertz Holdings Netherlands B.V. will use the proceeds to
redeem European debt."
"Our ratings on Park Ridge, N.J.-based car renter and equipment
renter Hertz Global Holdings Inc. (and therefore its major
operating subsidiary Hertz Corp.) reflect an aggressive financial
profile and the price-competitive, cyclical nature of on-airport
car rentals and equipment rentals. The ratings also incorporate
Hertz Global Holdings Inc.'s position as the largest global
car rental company and the strong cash flow its businesses
generate. We characterize Hertz Global Holdings Inc.'s business
risk profile as "fair," its financial risk profile as
"aggressive," and its liquidity as "adequate" under our
criteria."
"The stable rating outlook on Hertz Global Holdings Inc. reflects
Standard & Poor's expectation that the company's credit metrics
will improve modestly through 2014, with higher earnings and cash
flow offsetting the incremental debt from the November 2012
acquisition of competitor Dollar Thrifty Automotive Group Inc.
(DTAG). We expect earnings and cash flow to benefit from
synergies related to the DTAG acquisition, as well as stronger
demand at its equipment rental business. We expect funds from
operations (FFO) to debt of around 20% and EBITDA interest
coverage in the high-4x area."
"We do not expect to lower the ratings. However, we could lower
the ratings if FFO/debt declined to the mid-teens percent area
for a sustained period, due to significantly weaker demand
associated with reduced levels of airline travel, or if the used-
car market returned to the depressed levels seen in the late
2008-early 2009 period, resulting in losses on the sales of
vehicles. We could
raise the ratings if better-than-expected earnings or significant
debt reduction increased FFO to debt to the mid-20% area on a
sustained basis."
RATINGS LIST
Hertz Global Holdings Inc.
Hertz Corp.
Corporate Credit Rating B+/Stable
New Ratings
Hertz Holdings Netherlands B.V.
Senior notes due 2018 B
Recovery Rating 5
OAK LEAF: S&P Assigns 'B+' Corp. Credit Rating; Outlook Positive
----------------------------------------------------------------
Standard & Poor's Ratings Services has assigned its 'B+' long-
term corporate credit rating to Oak Leaf B.V. (Oak), a
Netherlands-based holding set up for the acquisition of D.E
MASTER BLENDERS 1753 B.V. (DEMB). The outlook is positive.
"At the same time, we assigned our 'B+' issue rating to Oak's
senior secured debt facilities, in line with the corporate credit
rating. The recovery rating on these facilities is '3',
indicating our expectation of meaningful (50%-70%) recovery in
the event of a payment default."
"Our rating on Oak reflects our view of the group's
"satisfactory" business risk profile and "highly leveraged"
financial risk profile, as our criteria define the terms. It
comes after our review of the final documentation, which
confirmed that the transaction took place as previously presented
to us."
"A consortium of investors led by Joh. A Benckiser (JAB) now owns
more than 95% of DEMB, and will acquire the remaining shares
through a statutory squeeze-out process. The consortium
successfully issued EUR3 billion of debt, EUR3.7 billion of
common equity, and EUR1.2 billion of perpetual preferred equity
at Oak Leaf B.V. We understand there is EUR29 million of
subsidiary debt as of the acquisition date, with restrictions in
place preventing DEMB from raising debt other than that allowed
under the predefined debt incurrence carve-outs from the bank
loan. We expect Oak and DEMB to merge after the squeeze-out.
Going forward, consolidated accounts will be at the level of
Acorn B.V., Oak's parent."
"We treat 50% of the preferred stock like equity under our hybrid
criteria. We recognize that the preferred stock provides the
company with some financial flexibility, as it has no maturity
date and is deferrable. We view the 6% coupon as relatively low
for a EUR1.2 billion subordinated instrument and attractive
enough to avoid its replacement by a pure debt instrument.
Moreover, we view holders of the stock as long-term partners: We
have assumed that if the preferred stock was called, it would be
replaced with another issue warranting at least an equal degree
of equity content. Still, the preferred stock also presents some
debt characteristics that prevent us from assigning it high
equity content, notably it is stock cumulative and callable after
five years."
"Based on our treatment of the preferred stock as 50% debt, Oak's
leverage is above 8.0x post-transaction, and remains well above
5.0x in the next two years in our base-case scenario. This places
the company in our highly-leveraged financial risk profile
category."
"We view Oak's business risk profile as satisfactory, reflecting
DEMB's leading international positions in the coffee industry.
DEMB derives more than 70% of its sales from markets where it is
either the first or second coffee company in terms of market
share, and has strong brand recognition, notably through
its Douwe Egberts, Pickwick, L'Or, and Senseo products. While we
believe coffee demand is fairly stable and nondiscretionary, it
is a competitive industry that requires strong brand equity with
a trend toward premium brands."
"DEMB's operating margins have contracted over the past two
fiscal years because price increases sometimes came late after
large hikes in green coffee prices and proved detrimental to
sales volumes. We acknowledge that the company issued a revised
outlook in February for fiscal 2013 (year ended June 29, 2013).
That said, green coffee bean prices have dropped markedly since
January 2012. Moreover, the new management team has indicated it
intends to improve the product mix, placing more emphasis on the
growing and higher-margin single-serve segment, while
capitalizing on DEMB's strong positions. We also understand that
DEMB is cutting costs. While we expect some price cuts in some
mature Western European markets, notably in the roast and ground
coffee segment, we think the new strategy, coupled with
significantly lower green coffee prices, will enable margin
gains."
"We consider that JAB will not have a negative bearing on Oak's
credit quality and assume that JAB's existing coffee businesses
will remain separate from DEMB's."
"The positive outlook reflects our view that Oak's credit metrics
will improve in the next 12 months, thanks to strengthening
operating performance at DEMB, notably due to lower green coffee
prices, cost efficiencies, and efficient working capital
management."
"We could upgrade Oak if it widened its EBITDA margin to about
20% and if we saw a clear deleveraging path as of the end of
fiscal 2014."
"We could revise our outlook to stable if Oak was unable to at
least stabilize its operating performance or if it failed to
start deleveraging in line with its targets."
PROSPERO CLO I: Moody's Affirms Caa2 Rating on Class D Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Prospero CLO I B.V.:
USD15,300,000 Class B Senior Secured Deferrable Interest
Floating Rate Notes Due 2017, Upgraded to Aa2 (sf); previously
on May 29 2013, Affirmed A1 (sf)
Moody's also affirmed the ratings of the following notes issued
by Prospero CLO I B.V.:
USD130,250,000 (current balance USD 1,322,964.72) Class A-1-A
Senior Secured Floating Rate Notes Due 2017, Affirmed Aaa (sf);
previously on May 29, 2013 Affirmed Aaa (sf)
EUR35,600,000 (current balance EUR 361,593.43) Class A-1-B
Senior Secured Floating Rate Notes Due 2017, Affirmed Aaa (sf);
previously on May 29, 2013 Affirmed Aaa (sf)
GBP24,500,000 (current balance GBP 248,849.41) Class A-1-C
Senior Secured Floating Rate Notes Due 2017, Affirmed Aaa (sf);
previously on May 29, 2013 Affirmed Aaa (sf)
USD15,300,000 Class A-2 Senior Secured Floating Rate Notes Due
2017, Affirmed Aaa (sf); previously on May 29, 2013 Upgraded to
Aaa (sf)
USD15,300,000 Class C Senior Secured Deferrable Interest
Floating Rate Notes Due 2017, Affirmed Ba2 (sf); previously on
May 29, 2013 Downgraded to Ba2 (sf)
USD7,700,000 Class D Senior Secured Deferrable Interest
Floating Rate Notes Due 2017, Affirmed Caa2 (sf); previously on
May 29, 2013 Downgraded to Caa2 (sf)
Prospero CLO I B.V., issued in April 2005, is a multi currency
Collateralised Loan Obligation ("CLO") backed by a portfolio of
mostly high yield senior secured US and European loans managed by
Alcentra Limited. This transaction passed its reinvestment period
in March 2010.
Ratings Rationale:
According to Moody's, the upgrade of the Class B notes is
primarily a result of the continued amortization of the portfolio
and subsequent increase in the collateralization ratios since the
last rating action in May 2013. Moody's notes that as of the
September 2013 payment date, the Class A-1 notes have paid down
by approximately US$19.2 million (41%) since the last rating
action in May 2013. As a result of this deleveraging, the
overcollateralization ratios (or "OC ratios") of the senior notes
have increased since the rating action in May 2013. As per the
trustee report dated 13 September 2013, the Class A, Class B,
Class C, and Class D ratios are reported at 208.46%, 154.06%,
122.17%, and 110.65% respectively, versus April 2013 levels of
169.46%, 136.16%, 113.79% and 105.10%. These OC ratios based on
the September 2013 report do not take into account payments made
from available principal proceeds on the September 2013 payment
date. Reported WARF has marginally decreased from 2706 to 2698
between April 2013 and September 2013, while exposure to Caa
assets has reduced from 12.2% to 7.7% during the same period.
Moody's notes the Oct 2013 trustee report has recently been
issued. Reported diversity score and weighted average spread are
materially unchanged from Sep 2013 data. Although October 2013
WARF is significantly higher compared to September 2013 data,
this is largely because two restructured assets totaling
approximately US$5 million earlier shown as defaulted are now
classified as performing with Ca ratings with no impact on
collateral pool credit quality. Moody's has incorporated into its
analysis the receipt of an additional US$4.6 million principal
proceeds reported in Oct 2013.
Moody's also notes that the portfolio includes a number of
investments in securities that mature after the maturity date of
the notes. Based on the September 2013 trustee report, such
securities currently total US$9.45 million (15.4% of reported
performing par) compared to US$16.22 million (15.7% of reported
performing par) in April 2013.
The majority of notes are denominated in USD, however the
transaction has significant exposure to non-USD denominated
assets. Volatilities in foreign exchange rates will have a direct
impact on interest and principal proceeds available to the
transaction, which may affect the expected loss of rated
tranches, particularly the junior ones. Current par coverage of
USD denominated liabilities by USD assets stands at 53% in
September 2013 (after taking into account payments to be made on
the notes from available principal proceeds on the September 2013
payment date) compared to 72% in April 2013. Non-USD liabilities
are significantly over-collateralized by assets in the respective
currencies.
In its base case, Moody's analyzed the underlying collateral pool
to have a performing par and principal proceeds balance of USD
87.37 million, defaulted par of US$7.53 million, a weighted
average rating factor of 3472 (corresponding to a default
probability of 18.69% over 2.5 years), a weighted average
recovery rate upon default of 49.57% for a Aaa liability target
rating, a diversity score of 16 and a weighted average spread of
3.21%. 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 91.66%% of the portfolio exposed to
senior secured corporate assets would recover 50% upon default,
0.78% non first-lien loan corporate assets would recover 15%, and
7.56% of structured finance assets would recover 47.86%. 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 risk
-- Approximately 8% of the portfolio consists of European
corporate rated B3 and below and maturing between 2013 and
2015, which may create challenges for issuers to refinance.
Moody's considered a model run where the base case WARF was
increased to 3561 by forcing ratings on 25% of such
exposure to Ca. This run generated model outputs that were
consistent with 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 uncertainties of credit
conditions in the general economy. 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 whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market
and/or collateral sales by the liquidation agent, which may have
significant impact on the notes' ratings. Typically, fast
amortization will benefit the ratings of the senior notes but may
negatively impact the ratings of the mezzanine and junior notes.
2) Recoveries on 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.
3). The deal has significant exposure to non-EUR denominated
assets. Volatilities in foreign exchange rate will have a direct
impact on interest and principal proceeds available to the
transaction, which may affect the expected loss of rated
tranches, particularly the junior ones.
Moody's notes that the portfolio is exposed 3.2% to obligors
located in Ireland with a country ceiling of A3. On 14 August
2013, Moody's released a report, which describes how Moody's
proposes to incorporate the additional risks 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.
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 EMEA
Cash-Flow 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. Therefore,
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.
===============
P O R T U G A L
===============
BRISA CONCESSAO: Moody's Affirms 'Ba2' Sr. Secured Notes Rating
---------------------------------------------------------------
Moody's Investors Service has affirmed the Ba2 senior secured
rating of Brisa Concessao Rodoviaria S.A. ("BCR"). Moody's has
also affirmed the provisional (P)Ba2 rating of BCR's euro medium-
term note program. The outlook on the ratings is negative.
This rating action follows Moody's recent decision to affirm the
Ba3 ratings of the Government of the Republic of Portugal and to
change its outlook to stable from negative.
Ratings Rationale:
The rating affirmation takes account of BCR's operating
performance in the first nine months of 2013, when traffic
declined by 4.4%. Whilst recent data remains weak, the rate of
deterioration has become lower compared with the previous year.
In particular, the recent traffic trends are more positive, with
traffic volumes falling by only 0.6% in Q3 2013 on a quarter-on-
quarter basis. This constitutes an improvement from the reported
declines of 9.9% and 4% in Q1 and Q2 of this year, respectively.
BCR is now suffering the sixth year of declining traffic volumes
due to the challenging economic conditions and austerity measures
affecting economic activity and consumption. Declines in traffic
volumes have been significantly higher than the contraction in
Portugal's GDP as a material adjustment in the use of tolled
motorways is driven primarily by heavily constrained household
budgets. In this regard, BCR's performance is evidence of the
company's inability to disconnect itself from local economic
circumstances given its domestic focus. Overall, and since 2007,
BCR has lost more than 30% in traffic volumes, the highest ratio
among the Moody's-rated European toll roads.
The decline in traffic volumes resulted in the company breaching
the trigger levels under its financing structure, but not the
default levels. As at June 30, 2013, BCR's net debt/EBITDA ratio
was 6.9x, compared with the trigger level of 6.5x, and its
interest cover ratio stood at 2.1x compared with the trigger
level of 2.25x. A persisting trigger event means that BCR cannot
make distributions and raise additional debt unless it is used to
repay existing debt. Moody's considers that recent traffic trends
are more supportive of BCR's financial profile, thus reducing the
risk of a further material erosion of the current headroom under
the company's default covenants. However, BCR's financial profile
remains highly leveraged and free cash flow generation is modest
in the context of the company's indebtedness, leaving little
headroom for further deterioration in operating cash flows.
BCR's liquidity is sufficient to cover the company's maturing
debt up to the end of 2015. The next major bullet debt maturity
is in December 2016, when a EUR600 million bond comes due. BCR's
ability to adequately manage its refinancing risk will be one of
the key drivers of the company's rating.
The Ba2 rating is constrained by (1) the volatile nature of
traffic on BCR's network, with significant traffic volume
declines since the start of the financial crisis; (2) high
leverage; (3) the reduced headroom against the default covenant
levels included in the company's debt documentation; and (4) the
ongoing refinancing risk given bullet debt maturities over the
medium term.
More positively, the rating also reflects the (1) the large size
and importance of BCR's network for Portugal's transport system;
(2) the transparency of the concession and regulatory framework;
(3) the company's modest capital investment program, which should
support free cash flow generation; (4) the covenant package and
other creditor protections incorporated within BCR's debt
documentation; and (5) a policy of prudent financial management.
Rationale for Negative Outlook:
The negative rating outlook reflects the vulnerability of BCR's
financial profile to any further operational challenges in the
context of the terms of its financing structure and in light of
its ongoing refinancing risk.
What Could Change the Rating Up/Down:
Given the negative outlook, Moody's does not currently expect
positive pressure on the rating. Moody's could change the outlook
to stable if (1) traffic on BCR's network were to at least
stabilize and the company's headroom against default covenant
levels was sufficient to accommodate a modest operational
underperformance due to, for example, traffic declines or cost
increases, including higher cost of debt; and (2) there was
continued evidence of BCR's ability to secure sufficient
liquidity well in advance of its upcoming debt maturities.
The rating would likely be adversely affected if (1) there are
further declines in traffic volumes in the short term, with no
indication of traffic stabilization in the medium term; (2) the
company fails to comply with event of default covenants under the
terms of the financing; or (3) liquidity concerns arise.
===========
R U S S I A
===========
MECHEL OAO: Expects Agreement on Covenant Holiday in Coming Weeks
-----------------------------------------------------------------
Courtney Weaver at The Financial Times reports that Mechel
plunged more than 40% in Moscow on Wednesday, Nov. 13, amid
increasing concerns about the company's more than US$9 billion
net debt burden.
Mechel said it had asked creditors for a covenant holiday at the
start of October and expected to come to an agreement with them
within the coming weeks, the FT relates.
"Our negotiations with banks on covenant holidays and debt
restructuring are going well, we expect them to be completed by
the end of November," the FT quotes a spokesman as saying.
"There were no negative events in the company. In our view, the
fall of Mechel's shares on equity markets is of a purely
speculative nature."
Mechel has been struggling to reduce its net debt, which totaled
US$9.6 billion as of June 1, and is in talks to sell assets that
are either lossmaking or not part of its core mining business,
the FT discloses.
The company has yet to publish its first-half results as doing so
would potentially trigger a technical default on its covenants,
which are pegged to the company's ratio of net debt to earnings
before interest, tax, depreciation and amortization, the FT
notes.
According to the FT, a Russian state banker denied that Igor
Zyuzin, Mechel's oligarch owner, or Mechel was facing margin
calls by his institution or that there were problems with the
covenant negotiations.
Mechel OAO is a Russian mining and metals company. Its business
includes four segments: mining, steel, ferroalloy and power.
Mechel unites producers of coal, iron ore concentrate, nickel,
ferrochrome, ferrosilicon, steel, rolled products, hardware, heat
and electric power. Mechel products are marketed domestically
and internationally.
VNESHPROMBANK: Moody's Rates Loan Participation Notes 'B2'
----------------------------------------------------------
Moody's Investors Service has assigned a B2 long-term foreign
currency senior unsecured debt rating to Vneshprombank's US$200
million Loan Participation Notes (LPN) with 9% fixed coupon rate
maturing on November 14, 2016. The notes were issued on a limited
recourse basis by a special purpose vehicle VPB Funding Limited
for the sole purpose of financing a loan to Vneshprombank.
Ratings Rationale:
The B2 foreign-currency senior unsecured debt rating assigned to
the notes is based on the fundamental credit quality of
Vneshprombank and is aligned with its baseline credit assessment
of b2. The holders of the notes will be relying solely and
exclusively on the credit and financial standing of Vneshprombank
in respect of the financial servicing of the notes. According to
the terms of the issue, Vneshprombank must comply with a number
of covenants, including a negative pledge clause, limitations on
mergers, assets and revenues disposals, and transactions with
affiliates. In addition, Vneshprombank is obliged to maintain a
capital-to-risk-weighted assets ratio not less than 12% (total
capital adequacy ratio under Basel 14.2% as of 1 July 2013
according to audited IFRS).
Vneshprombank's LPNs will rank at least "pari passu" with all
other unsecured and unsubordinated obligations of the bank in the
event of bankruptcy, insolvency or liquidation.
What Could Move the Ratings Up/Down:
Moody's might consider a positive rating action on Vneshprombank
if further diversification of its franchise results in reduced
single-name concentrations in liabilities and assets -- with no
deterioration of other financial indicators.
The bank's ratings could be negatively affected by a
deterioration in asset quality, liquidity, and/or core capital
adequacy, although the rating agency does not expect such
developments to materialise in the next 12 to 18 months.
Headquartered in Moscow, Russia, Vneshprombank reported total
consolidated assets and total capital of US$4.3 billion and
US$296 million, respectively, in accordance with audited IFRS as
of H1 2013.
=========
S P A I N
=========
FAGOR: Commences Insolvency Proceedings After Debt Deal Fails
-------------------------------------------------------------
Robert Hetz and Sarah White at Reuters report that Fagor said on
Wednesday it had started insolvency proceedings after failing to
reach a deal on debt which it needed to keep going as sales fell.
Fagor, part of the Mondragon group, is the fifth-largest
electrical appliance company in Europe. Its Irish subsidiary
also started bankruptcy proceedings on Wednesday, while its
French unit did the same last week, Reuters recounts. The
company, which also operates in Morocco and Poland, said more
subsidiaries would also file for insolvency in the coming days,
Reuters notes.
Fagor, which has total debt of EUR1.1 billion (US$1.48 billion)
according to Thomson Reuters data, began warning of liquidity
problems as far back as 2009.
It needed EUR170 million to cover immediate liquidity needs,
after filing for creditor protection in October, but Mondragon
declined to provide the funds, leaving Fagor with few
alternatives, Reuters discloses.
The company, which had just over 5,600 employees at the end of
June, posted 2012 annual sales of EUR1.17 billion, down a third
since 2007, Reuters relays.
Fagor is a Spanish consumer appliance company.
===========
S W E D E N
===========
SSAB AB: S&P Revises Outlook to Neg. & Affirms 'BB/B' Ratings
-------------------------------------------------------------
Standard & Poor's Rating Services revised its outlook on Swedish
steelmaker SSAB AB to negative from stable. At the same time, S&P
affirmed its 'BB' long-term and 'B' short-term corporate credit
ratings on SSAB.
"At the same time, we affirmed our issue rating on SSAB's senior
unsecured debt at 'BB'. The recovery rating on this debt is
unchanged at '3', indicating our expectation of meaningful (50%-
70%) recovery in the event of a payment default."
"The outlook revision follows a weakening of SSAB's earnings in
the third quarter of 2013. SSAB's results were weaker than both
those of its peers and our previous forecasts, due to a weak
product mix and tight margins. Consequently, we have revised
downward our forecasts for SSAB's credit metrics for 2013 and
2014, and our assessment of SSAB's financial risk profile to
"aggressive" from "significant."
"The outlook revision reflects the challenges that we consider
SSAB will face in turning its operations around and significantly
improving its profitability in 2014. If we believe that SSAB's
EBITDA will not recover markedly to Swedish krona (SEK) 3 billion
in 2014, from the trough of SEK1.3 billion-SEK1.4 billion that we
project this year, a further one-notch downgrade is likely in
the first half of 2014. This would happen if SSAB's results in
the coming quarters do not show a clear improvement in its North
American operations and a lower contribution from its European
operations. We consider Standard & Poor's-adjusted funds from
operations (FFO) to debt of 20%-25% to be commensurate with the
current rating, but our revised projection of EBITDA of SEK2.8
billion-SEK3.0 billion in 2014 equates to adjusted FFO to debt of
only 12%-15%."
"In the third quarter of 2013, SSAB reported EBITDA of only SEK8
million, while EBITDA in the first nine months of 2013 was SEK1.1
billion. For full-year 2013, we have revised our projection of
adjusted EBITDA downward materially to SEK1.3 billion-SEK1.4
billion from SEK2.6 billion. If we deduct the savings from SSAB's
ongoing cost-efficiency program of SEK500 million, SSAB's 2013
results would be even weaker. In our view, some of the factors
that underpin SSAB's weak 2013 results include low demand for
steel in Europe; unfavorable currency exchange rates of the
Swedish krona versus the U.S. dollar; and tight margins for steel
plates in the U.S. The EBIT margin of SSAB's North American
operations dropped to about 1% in the first nine months of 2013,
from 12% in 2011 and 2012."
"There is a possibility of us downgrading SSAB by one notch in
the first half of 2014 if EBITDA in the coming two quarters does
not indicate a material recovery in 2014. A negative rating
action would be triggered by one or more of the following:
-- Continuous weak results in the U.S. operations;
-- An unfavorable product mix in Europe, with no pick-up in the
demand for specialty steel products;
-- A drop in the demand for steel in Europe; and
-- Further strengthening of the Swedish krona.
"We could revise the outlook to stable if the European
macroeconomic and steel environments improve. An outlook revision
to stable will depend on SSAB's EBITDA recovering markedly to at
least SEK3 billion for full-year 2014. We believe this would
equate to adjusted FFO to debt recovering to 15%, factoring
in our assumption of continued positive free cash flow and a
further improvement in free cash flow in 2015."
===========
T U R K E Y
===========
KUVEYT TURK: Fitch Retains 'bb-' Viability Rating
-------------------------------------------------
This announcement corrects the version that was published
earlier. The Viability Ratings of the five state-owned banks
should be 'bbb-' and not 'bb+'.
Fitch Ratings has affirmed the support-driven Issuer Default
Ratings (IDR) of seven Turkish banks. The banks include five
state-owned banks and two banks owned by more highly rated
foreign banks. The rating actions follow the recent affirmation
of Turkey's sovereign ratings. Fitch will separately review the
Viability Ratings (VR) of these banks.
Key Rating Drivers - IDRs, National Ratings, Support Ratings,
Support Rating Floors and Senior Debt Ratings of Five State-Owned
Banks:
The IDRs and senior debt ratings of the five state-owned banks -
T. C. Ziraat Bankasi A.S. (Ziraat), Turkiye Halk Bankasi A.S.
(Halkbank), Turkiye Vakiflar Bankasi T.A.O. (Vakifbank), Turkiye
Kalkinma Bankasi A.S. (TKB) and Turkiye Ihracat Kredi Bankasi
A.S. (Turk Eximbank) - are aligned with those of the Turkish
sovereign.
This reflects Fitch's opinion that the probability of state
support for these banks in case of need is high. This in turn
reflects their state ownership, systemic importance (in the cases
of Ziraat, Halkbank and Vakifbank), policy roles (most notably
for Turk Eximbank and TKB), the track record of support to date
and the still moderate size of the banks relative to Turkey's
GDP.
The degree of state ownership at the five banks varies. Turk
Eximbank, Ziraat and TKB are fully state-owned, while state
ownership at Halkbank (51%) and Vakifbank (58%) is lower.
However, Fitch believes there are currently no plans to further
privatise Halkbank and Vakifbank and expects them to remain
majority state-owned for the foreseeable future.
Fitch views the systemic importance of Ziraat, Halkbank and
Vakifbank as high as they have deep franchises and extensive
nationwide branch networks, and together control one-third of the
country's customer deposits. Ziraat and Halkbank are the sole
distributors of subsidized loans to the agricultural and SME
sectors, respectively, although these represent a moderate
proportion of the banks' total lending. In addition, only state-
owned commercial banks are eligible to receive savings deposits
from state-owned companies and entities and only these banks pay
out state pensions. High-ranking government officials have
recently also encouraged retail depositors to move deposits to
state-owned banks.
TKB and Turk Eximbank are not commercial banks, but development
institutions with primary policy roles. TKB specializes in the
provision of long-term development finance while Turk Eximbank is
the country's official export credit agency and implements the
government's official export strategies. The latter enjoys
privileges, notably Treasury compensation of losses suffered as a
result of political risks, and exemption from corporate taxes and
loan loss reserve requirements. The Turkish Treasury also
guarantees most funding at TKB and also when required provides
guarantees for Turk Eximbank's funding.
Turkey's banking sector remains moderate in size, and the
combined assets, loans and equity of the five state-owned banks
covered in this commentary were equal to, respectively, 30%, 16%
and 3% of GDP at end-June 2013. The five banks' foreign funding
was equal to a significant 16% of Turkey's projected foreign
currency reserves at end-2013, but reasonable diversification of
this funding by maturity and source means that even in a systemic
crisis the sovereign is unlikely to have to cover the majority of
these obligations in a short space of time, in Fitch's view.
Turkey, as a member of the G20 countries, has endorsed principles
aimed at shifting the onus of bailing out banks in future away
from taxpayers. Furthermore, the Banking Regulation and
Supervision Agency (BRSA), the Savings Deposit Insurance Fund
(SDIF) and the Central Bank are discussing the introduction of
resolution legislation in Turkey. However, in Fitch's view,
adoption of such legislation is unlikely to be imminent, and ties
between the government and state-owned banks are likely to remain
strong for the foreseeable future. The current banking law
includes provisions regarding rehabilitation, corrective and
other measures to be adopted in respect of ailing banks but does
not provide for statutory bailing in of creditors.
National ratings are assigned by Fitch based on a matrix which
references Local Currency Long-term IDRs. The corresponding
National Long-term Ratings for the state-owned banks are
'AAA(tur)', indicating that these are the best relative credit
risks in Turkey.
Rating Sensitivities - IDRs, National Ratings, Support Ratings,
Support Rating Floors and Senior Debt Ratings of Five State-Owned
Banks:
An upgrade or downgrade of Turkey's sovereign ratings (not
currently expected given the Stable Outlook) would likely result
in similar rating actions on each of the five state-owned banks.
The Support Ratings and Support Rating Floors (SRFs) of Ziraat,
Halkbank and Vakifbank could also be downgraded in case of (i)
the introduction of resolution legislation in Turkey which seeks
to limit the use of public funds to rescue failed banks,
including state-owned institutions; (ii) the privatization of the
banks (this would likely result in a one notch downgrade of SRFs
to 'BB+', the same level as the SRFs of the largest privately-
owned banks unless privatization results in the banks being owned
by a strong shareholder); or (iii) any significant reduction in
the sovereign's financing flexibility which would limit its
ability to provide support to the banking sector. However,
downgrades of Support Ratings and SRFs would not by themselves
lead to downgrades of the banks' Long-term foreign currency IDRs
and senior debt, as these are underpinned at the 'BBB-' level by
the Viability Ratings of Ziraat, Halkbank and Vakifbank,
reflecting their standalone strength. Privatization would result
in a decoupling of state-owned banks' ratings from those of the
sovereign.
Key Rating Drivers and Sensitivities - IDRs, National Ratings,
Support Ratings and Sukuk Ratings of Kuveyt Turk and Turkiye
Finans:
The ratings of Kuveyt Turk Katilim Bankasi A.S. (Kuveyt Turk) and
Turkiye Finans Katilim Bankasi A.S. (Turkiye Finans) are based on
Fitch's view of the high probability of support being available
from their majority shareholders, namely Kuwait Finance House and
National Commercial Bank, respectively (both rated A+/Stable).
Fitch believes the Turkish subsidiaries are strategically
important to their parents and that integration between parent
banks and subsidiaries is high.
The Long-term foreign currency IDRs of Kuveyt Turk and Turkiye
Finans are constrained by Turkey's 'BBB' Country Ceiling and
broader Turkish country risks and are sensitive to any changes in
the Ceiling, Turkey's sovereign ratings or Fitch's view of these
risks. The banks' ratings could also be downgraded in case of a
multi-notch downgrade of one of the parent banks, or a marked
reduction in the strategic importance of either of the
subsidiaries for their parents, but neither of these is currently
anticipated by Fitch.
The rating actions are as follows:
T. C. Ziraat Bankasi A.S., Turkiye Halk Bankasi A.S., Turkiye
Vakiflar Bankasi T.A.O., Turkiye Kalkinma Bankasi A.S., Turkiye
Ihracat Kredi Bankasi A.S.:
- Long-term foreign currency IDR: affirmed at 'BBB-'; Stable
Outlook
- Long-term local currency IDR: affirmed at 'BBB'; Stable
Outlook
- Short-term foreign and local currency IDR: affirmed at 'F3'
- Support Rating: affirmed at '2'
- Support Rating Floor: affirmed at 'BBB-'
- National Long-term Rating: affirmed at 'AAA(tur)'; Stable
Outlook
- Senior unsecured debt issues (Halkbank, Vakifbank): affirmed
at 'BBB-'
- Viability Ratings (Ziraat, Halkbank and Vakifbank): unaffected
at 'bbb-'
Kuveyt Turk Katilim Bankasi A.S. and Turkiye Finans Katilim
Bankasi A.S.:
- Long-term foreign currency IDR: affirmed at 'BBB'; Stable
Outlook
- Long-term local currency IDR: affirmed at 'BBB+'; Stable
Outlook
- Short-term foreign currency IDR: affirmed at 'F3'
- Short-term local currency IDR: affirmed at 'F2'
- Support Rating: affirmed at '2'
- National Long-term Rating: affirmed at 'AAA(tur)'; Stable
Outlook
- Viability Rating: unaffected at 'bb-'
TF Varlik Kiralama A.S., KT Sukuk Varlik Kiralama A.S.
Senior unsecured debt issues (sukuk): affirmed at 'BBB'
=============
U K R A I N E
=============
UKRAINE: Fitch Cuts LT Currency IDRs on 11 Companies to 'B-'
------------------------------------------------------------
Fitch Ratings has downgraded 11 Ukrainian companies' ratings,
following the agency's rating action on Ukraine's sovereign
ratings.
The agency downgraded Ukraine's Long term foreign and local
currency Issuer Default Ratings (IDRs) to 'B-' from 'B' and
affirmed the Short-term foreign currency IDR at 'B'. Ukraine's
Country Ceiling was downgraded to 'B-' from 'B'.
The rating actions on the corporates' foreign currency ratings
reflect the effective constraint by the Country Ceiling, while
local currency ratings reflect the worsened economic outlook for
Ukraine, including the expectation of weaker GDP growth and the
risks of a deteriorating business environment that may affect
corporates with operations in the country.
The rating actions are as follows:
Avangardco Investmente Plc
- Long-term foreign currency IDR downgraded to 'B-'; from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- Foreign currency senior unsecured rating: downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
- National Long-term rating: affirmed at 'AA+(ukr)'; Outlook
Stable
DTEK Holdings B.V.:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Short-term foreign currency IDR: affirmed at 'B'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- Foreign currency senior unsecured rating: downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
- Short-term local currency IDR: affirmed at 'B'
- National Long-term rating: affirmed at 'AA+(ukr)'; Outlook
Stable
- National senior unsecured rating: affirmed at 'AA+(ukr)'
DTEK Finance BV's senior unsecured notes and DTEK Finance plc's
senior unsecured guaranteed notes downgraded to 'B-' from 'B';
Recovery Rating of 'RR4'
Ferrexpo Plc:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Short-term foreign currency IDR: affirmed at 'B'
- Foreign currency senior unsecured rating downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
Ferrexpo Finance plc's guaranteed notes' senior unsecured rating
downgraded to 'B-' from 'B'; Recovery Rating of 'RR4'
Fintest Trading Co. Limited:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating is constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: affirmed at 'B'; Outlook
Negative
- National Long-term rating: upgraded to 'AA(ukr)' from
'A+(ukr)'; Outlook Stable
Kernel Holding SA:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- National Long-term rating: affirmed at 'AA+(ukr)'; Outlook
Stable
Lemtrans LLC:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating is constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: affirmed at 'B'; Outlook
Negative
- Foreign currency senior unsecured rating: downgraded to 'B-'
from 'B', Recovery Rating of 'RR4'
Metinvest B.V.:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Short-term foreign currency IDR: affirmed at 'B'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- Foreign currency senior unsecured rating downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
- Short-term local currency IDR: affirmed at 'B'
- National Long-term rating: affirmed at 'AA+(ukr)' ; Outlook
Stable
- National Short-term rating: affirmed at 'F1+(ukr)'
MHP S.A.:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- Foreign currency senior unsecured rating downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
OJSC Myronivsky Hliboproduct (MHP S.A.'s 99.9% owned subsidiary)
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- National Long-term rating: affirmed at 'AA+(ukr)'; Outlook
Stable
Mriya Agro Holding PLC:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating is constrained by Ukraine's
Country Ceiling of 'B-'
- Short-term foreign currency IDR: affirmed at 'B'
- Long-term local currency IDR: affirmed at 'B'; Outlook
Negative
- Short-term local currency IDR: affirmed at 'B'
- Foreign currency senior unsecured rating downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
- National Long-term rating: upgraded to 'AA(ukr)' from 'A-
(ukr)'; Outlook Stable
NJSC Naftogaz of Ukraine (Naftogaz):
- Long-term foreign currency IDR: affirmed at 'CCC'
- Long-term local currency IDR: affirmed at 'CCC'
- Senior unsecured foreign currency rating in respect of
USD1,595m bond guaranteed by Ukraine downgraded to 'B-' from
'B'; Recovery Rating of 'RR4'
OJSC Creative Group Public Limited:
- Long-term foreign currency IDR: affirmed at 'B-'; Outlook
revised to Negative from Positive.
- Long-term local currency IDR: affirmed at 'B-'; Outlook
revised to Stable from Positive
- National Long-term rating: affirmed at 'BBB+(ukr)'; Outlook
Positive
Ukrlandfarming PLC:
- Long-term foreign currency IDR: downgraded to 'B-' from 'B';
Outlook Negative. The rating remains constrained by Ukraine's
Country Ceiling of 'B-'
- Long-term local currency IDR: downgraded to 'B' from 'B+';
Outlook Negative
- Foreign currency senior unsecured rating downgraded to 'B-'
from 'B'; Recovery Rating of 'RR4'
- National Long-term rating: affirmed at 'AA+(ukr)'; Outlook
Stable
===========================
U N I T E D K I N G D O M
===========================
20TWENTY INDEPENDENT: Enters Voluntary Liquidation
--------------------------------------------------
Laura Miller at IFAonline reports that 20Twenty Independent has
entered voluntary liquidation after a spate of claims against it
relating to a film tax avoidance scheme.
IFAonline relates that in a letter dated October 21 to the firm's
clients, 20Twenty Independent managing director Vince de Stefano
stated that "over the past year, the firm has seen its income
fall significantly following the loss of its advisory team and
its running costs spiral", particularly professional indemnity
(PI) premiums.
Mr. De Stefano -- who is currently listed on the Financial
Conduct Authority (FCA) register as inactive -- continues: "I
found myself with no alternative other than to call in
liquidators."
According to the report, the move follows a series of successful
claims, lead by claims management firm Rebus, in March against
the firm in which five investors who suffered heavy losses after
being advised by 20Twenty to invest in Crossover Film
Partnerships won GBP2.6 million at the Financial Ombudsman Scheme
(FOS).
IFAonline notes that the FOS ruled that the advice given by
20Twenty Independent was unsuitable and that the claimants were
not aware of the level of losses they could be exposed to.
Those five investors have been paid out, however Rebus has now
been advised that, before entering voluntary liquidation,
20Twenty changed PI providers several times, with each change
leading to an alteration of the PI insurer's terms and
conditions, IFAonline adds.
CMB Partners were appointed liquidators of 20Twenty Independent.
ARCK LIMITED: Ex-Directors received GBP4MM From Scheme
------------------------------------------------------
Jun Merrett at citywire.co.uk reports that the former directors
of collapsed unregulated investment scheme Arck LLP are alleged
to have received payments of GBP4 million from the company prior
to it entering liquidation in 2012.
citywire.co.uk relates that an annual report on the failed scheme
by joint liquidators Butcher Woods and Rendle & Co has revealed
that former director Richard Clay received around GBP3.6 million
in payments from the company, while co-director Kathryn Clark
received payments of GBP580,000.
The report said neither was able to provide an adequate
explanation for the receipt of the money, citywire.co.uk relates.
According to citywire.co.uk, around 750 investors put
GBP63 million into Arck which offered plots of land with planning
permission, prior to entering liquidation in June 2012 amidst an
investigation by the Financial Services Authority and the Serious
Fraud Office (SFO).
Ms. Clark was arrested in March 2012 by Nottinghamshire Police on
suspicion of fraud by false representation and money laundering.
Mr. Clay was also arrested, citywire.co.uk relays. No charges
have been brought.
The report said Ms. Clark and any assets she may have were
subject to restraint and freezing orders, adds citywire.co.uk.
citywire.co.uk notes that Mr. Clay was declared bankrupt in May.
The liquidators' report reveals he was pushed into bankruptcy
after being unable to pay costs relating to a Range Rover he had
bought with money loaned from Arck, citywire.co.uk reports.
Arck Limited Liability Partnership was a property investment
company.
ARGON CAPITAL: Moody's Confirms 'B1' Rating on GBP750MM Secs.
-------------------------------------------------------------
Moody's Investors Service has confirmed the rating of the
following notes issued by Argon Capital PLC:
Series 100 GBP750,000,000 Perpetual Non-Cumulative Securities,
Confirmed at B1; previously on Jul 11, 2013 B1 Placed Under
Review for Possible Downgrade
The transaction is a repackaging of preference shares issued by
Royal Bank of Scotland Group PLC.
Ratings Rationale:
Moody's explained that the rating action taken is the result of
the rating action on the preference shares of Royal Bank of
Scotland Group PLC whose B1 (hyb) on review for possible
downgrade was confirmed on November 5, 2013. The transaction is a
repackaging of preference shares issued by Royal Bank of Scotland
Group PLC.
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) more specifically, any
uncertainty associated with the underlying credits in the
transaction could have a direct impact on the repackaged
transaction.
Moody's conducted no cash flow analysis, sensitivity or stress
scenarios because the ratings are a direct pass-through of the
rating of the Royal Bank of Scotland Group PLC preference shares.
JKL (WAKEFIELD): Liquidators Auction Off Luxury Cars
----------------------------------------------------
David Parkin at thebusinessdesk.com reports that luxury cars,
including a McLaren MP4 supercar, which once belonged to former
directors of JKL (Wakefield), trading as Eric France Metals, are
to be auctioned by liquidators.
The McLaren plus two Porsches and two Range Rovers and watches
including two IWC models and two Rolex models and an unused Vertu
Constellation T mobile phone -- which cost several thousand
pounds -- will go under the hammer in an online auction arranged
by Yorkshire property agents Sanderson Weatherall, relates
thebusinessdesk.com.
As reported in the Troubled Company Reporter-Europe on Feb. 28,
2013, Wakefield Express said liquidators were appointed to JKL
(Wakefield) Ltd at a meeting with the company's creditors on
February 26.
Liquidators KPMG and PricewaterhouseCoopers said: "It is
understood that, according to the directors' statement of
affairs, GBP21 million of the company's total debts of
GBP22 million relate to unpaid VAT."
Ossett-based JKL (Wakefield) Ltd was a sponsor of Rugby League
clubs Wakefield Wildcats and Dewsbury Rams.
MARSDEN SMITH: Bought Out of Administration; 15 Jobs Secured
------------------------------------------------------------
Insolvency Today reports that Marsden Smith Limited has been sold
out of administration, securing the jobs of all 15 staff.
According to Insolvency Today, the firm had amassed "substantial
debts", meaning a Company Voluntary Arrangement (CVA) was
unsustainable, with "exacerbated cash flow problems" leading the
company entering administration.
Simon Plant and Daniel Plant of SFP were appointed joint
administrators on Oct. 31, Insolvency Today relates.
MS had an average annual turnover of GBP1 million, but
accumulated considerable debts, including sums owed to HM Revenue
and Customs (HMRC), Insolvency Today discloses.
"The electronic manufacturing industry has been hit hard by the
economic downturn and this has caused the failure of Marsden
Smith Limited. Following a brief marketing campaign, a sale of
the business and assets has now been concluded, saving jobs and
enhancing realisations for the administration estate," Insolvency
Today quotes Simon Plant, director at SFP, as saying.
Marsden Smith Limited is a Somerset manufacturer of electronics
equipment.
PRECISE MORTGAGE: S&P Assigns Prelim. 'BB+' Rating to Cl. E Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
credit ratings to Precise Mortgage Funding No. 1 PLC's class A to
E notes. At closing, Precise Mortgage Funding No. 1 will also
issue unrated class Z notes and subordinated notes.
At closing, the issuer will purchase an initial portfolio of U.K.
residential mortgages from the seller (Buttermere PLC), using the
note issuance proceeds to purchase the rights to the mortgage
pool.
The class A to Z note issuance balance will be higher than the
balance of the initial pool that the issuer will purchase at
closing, where the difference will be a prefunding amount. S&P
expect this prefunding amount to be approximately 20% of the
class A to Z notes. Up until and including the first interest
payment date (March 12, 2014), the issuer can buy a further
portfolio, with a balance up to the prefunding amount. This
portfolio will be subject to certain prefunding conditions, based
on which, S&P has made conservative assumptions relating to the
prefunding pool's credit and cash flow characteristics.
The transaction will have a rated note reserve fund, a class A
liquidity reserve, and a fully funded prefunding yield
maintenance required amount. The rated note reserve fund will
initially provide liquidity support to the rated notes. As the
rated notes redeem, this support will switch to credit
enhancement for the rated notes.
This is the first transaction from Charter Court Financial
Services Ltd. The GBP131.1 million pool (as of Oct. 31, 2013)
comprises first-lien U.K. nonconforming residential mortgages.
Charter Court Financial Services has originated the loans since
March 2013, under its trading name, Precise Mortgages. The
initial pool's weighted-average seasoning is 2.59 months.
Of the provisional pool, 13.71% of loans are to borrowers with
previous county court judgments. Buy-to-let loans comprise 34.93%
of the pool. The portfolio's weighted-average current indexed
loan-to-value ratio is 70.26% (according to S&P's methodology),
with 35.95% of the properties located in the South East,
including London.
The class A to E notes' interest rates will be equal to three-
month British pound sterling LIBOR, plus a class-specific margin
with a step-up margin after the optional redemption date.
The initial pool contains loans that are currently fixed rate
(72.49%) and floating rate (27.51%), both linked to either the
Bank of England base rate (BBR) or LIBOR. As the notes' interest
will be based on an index of three-month sterling LIBOR, the
transaction will be subject to basis risk and interest rate
mismatch. All loans have an interest rate reversionary date
before December 2018, where the majority (82.6%) will revert to a
LIBOR-linked interest rate and the remaining (17.4%) are linked
to the BBR. At closing, the issuer will enter into an interest
rate swap that will hedge the interest rate
mismatch attached to the fixed-rate loans. For the loans linked
to the BBR, S&P applied a basis stress using historical
differences between the index paid on the BBR-linked assets and
the liabilities' index. The floating-rate LIBOR-linked mortgages
reset on the same day as the notes. Therefore, these loans are
not subject to basis risk.
S&P's preliminary ratings reflect its assessment of the
transaction's payment structure, cash flow mechanics, prefunding
conditions, and the results of its cash flow analysis to assess
whether the notes would be repaid under stress test scenarios.
Subordination and the rated note reserve fund provide credit
enhancement to the notes that are senior to the unrated class Z
notes. Taking these factors into account, S&P considers the
available credit enhancement for the rated notes to be
commensurate with the preliminary ratings that S&P has
assigned. S&P has also considered if a further portfolio is not
bought by the issuer where the prefunding amount is used to
redeem notes.
RATINGS LIST
Precise Mortgage Funding No. 1 PLC
Sterling Denominated Residential Mortgage-Backed Floating-Rate
Notes And Unrated Notes
Class Prelim. Prelim.
rating amount
(mil. GBP)
A AAA (sf) TBD
B AA (sf) TBD
C AA- (sf) TBD
D BBB (sf) TBD
E BB+ (sf) TBD
Z NR TBD
Subordinated NR TBD
NR-Not rated.
TBD-To be determined.
SANTANDER ASSET: S&P Assigns 'BB/B' LT Counterparty Ratings
-----------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its 'BB'
long-term and 'B' short-term counterparty credit ratings to
Santander Asset Management Investment Holdings Ltd., the
Jersey-incorporated holding company of asset manager Santander
Asset Management (SAM or the group). S&P also assigned a 'BB'
issue rating to Santander Asset Management Investment Holdings
Ltd.'s proposed senior secured term loan B. The outlook is
stable.
Santander Asset Management Investment Holdings Ltd. (the company)
is a newly formed non-operating holding company consolidating the
asset management subsidiaries of Banco Santander S.A. into a
separate entity. The ratings on the company are based on the 'bb'
group credit profile (GCP) of the operating entities that
comprise SAM. "We equalize the ratings on the company with the
GCP of SAM (that is, we do not notch down for structural
subordination) given our view that there are no material barriers
to cash flows from the operating entities to the company. We do
not factor any notches of uplift for potential extraordinary
support from Banco Santander into the ratings given our view
that SAM is a "non-strategic" subsidiary, as our criteria define
this term. Instead we incorporate the ongoing benefits of SAM's
association with Banco Santander in the GCP," said S&P.
The GCP of SAM reflects Standard & Poor's view of its high debt
leverage and relatively weak debt service capacity once the sale
of 50% of SAM to private equity sponsors Warburg Pincus and
General Atlantic is completed. It also reflects S&P's view of
SAM's limited franchise in the institutional channel. In
addition, the absence of a governance and management track record
of the group operating as a separate entity under joint ownership
with the private equity sponsors is a constraining factor. The
GCP is supported by SAM's competitive market position in its core
Iberian and Latin American markets, exclusive distribution
agreement with Banco Santander, and conservative mix of assets
under management (AUM) with relatively low volatility.
SAM is a midsize asset manager in global terms with AUM at June
30, 2013 of EUR147 billion ($191 billion). At approximately 77%
of AUM, SAM's client base is skewed toward retail clients as a
result of its close association with Banco Santander's extensive
retail branch network. SAM is the leading asset manager in Spain
(EUR51.5 billion AUM at end-December 2012) by revenue share and
among the top-five asset managers in Brazil (EUR40.1 billion AUM)
and Mexico (EUR11.9 billion AUM). It also has a meaningful
presence in the competitive U.K. market with EUR24 billion of
AUM.
SAM's conservative AUM mix (approximately 90% in fixed income,
money markets, and related products) has supported a relatively
stable track record of AUM growth since 2008, both through net
fund inflows and market appreciation. "While we recognize
downside risks to fixed income-focused managers' investment
performance in a rising interest rate environment, we note the
short average durations of SAM's portfolio positions. AUM at
June 30, 2013 of EUR147 billion represented a 21.7% increase over
the previous year, with strong growth in Spain and Portugal. We
note, however, that part of the increase can be attributed to a
EUR14.7 billion low fee margin institutional mandate from
Santander Insurance. We view SAM's long-term (10 years plus two
five-year extensions) exclusive distribution agreement with Banco
Santander as a supportive factor for our assessment of the
group's business stability. Furthermore, we view positively the
flexibility in the commission structure that reduces the
commission rate on a sliding scale if gross fee income growth
fails to meet the agreed plan," according to S&P.
On May 30, 2013, Warburg Pincus and General Atlantic entered into
a definitive agreement to purchase 50% of SAM from Banco
Santander. The transaction will be financed with EUR885 million
of debt, amounting to 47% of total capitalization. "As a result
of the debt financing, we expect SAM's leverage -- as measured by
gross debt-to-EBITDA -- to be high at around 4.0x at end-2013. We
expect SAM's debt-servicing capacity -- as measured by EBITDA-to-
gross interest expense -- to be weak at around 5.0x-5.5x. We
expect a gradual improvement in these metrics, assuming no
additional debt and modest AUM growth resulting in an improvement
in profitability over the one-year rating horizon," S&P said.
Although SAM's focus on retail clients supports a high management
fee margin relative to peers (around 75 bps), the group's overall
profitability/cash flow generation in terms of EBITDA margin is
modest at around 20%-21%, primarily due to high distribution
expense.
"On a pro forma basis, we expect SAM to have negative tangible
equity as a result of goodwill generated in the transaction.
While we focus more on cash flow-generation abilities and view
capitalization as a secondary rating factor for asset managers,
we view negative tangible equity as a rating weakness in the
context of SAM's ability to absorb unexpected losses," said S&P.
The stable outlook reflects S&P's expectation that the group's
debt service and leverage metrics will remain at levels in line
with the current rating over the one-year outlook horizon. S&P
considers that SAM's competitive position in growth markets,
distribution reach, and stable business model should, over
time, help place its financial profile on a more sustainable
footing.
"We could lower the ratings if: (a) we expect that debt service
and leverage measures will weaken from expected levels, (b) we
observe a substantial setback in fund flows, or (c) we observe a
more aggressive financial policy or material deviation from its
business plan with credit negative implications such as a major
acquisition," said S&P.
"We could revise the outlook to positive if SAM demonstrates
progress on delivering on its business plan of solid, mainly
organic, growth combined with a material and sustained
improvement in its leverage, debt service, and
profitability metrics."
===============
X X X X X X X X
===============
EUROPE: S&P Withdraws Ratings on 16 European CDO Tranches
---------------------------------------------------------
Standard & Poor's Ratings Services withdrew its credit ratings on
16 European synthetic collateralized debt obligation (CDO) and
cash tranches. Of these, S&P has lowered to 'D(sf)' and
withdrawn its rating on one tranche.
S&P has withdrawn its ratings on these tranches for different
reasons, including:
-- The issuer has fully repurchased and cancelled the notes;
-- The early redemption of the notes; and
-- The transaction has been unwound.
S&P provides the rating withdrawal reason for each individual
tranche in the separate ratings list.
S&P has lowered to 'D(sf)' and subsequently withdrawn its rating
on one tranche. The downgrade to 'D(sf)' follows confirmation
that losses from credit events in the underlying portfolios
exceeded the available credit enhancement levels. This means that
the noteholders did not receive full principal on the early
termination date for this tranche. The rating lowered
to 'D(sf)' will remain at 'D (sf)' for a period of 30 days before
the withdrawal becomes effective.
List of European Synthetic CDO Tranche Rating Withdrawals
at Nov. 11, 2013
Issuer/Issue Rating Rating Reason for
description To From withdrawal
------------ ------ ------ -----------
Arosa Funding Ltd.
US$100 mil secured
floating-rate credit-
linked notes series 2006-7 NR A+(sf) Notes fully
repurchased
and cancelled
Corsair (Jersey) No. 4 Ltd.
US$150 mil floating-rate
secured portfolio credit-
linked notes series 4 NR BB(sf) Transaction
unwound
Corsair (Jersey) No. 4 Ltd.
US$85 mil cross-contingent
step-down portfolio credit-
linked notes series 6 NR B+(sf) Transaction
unwound
Corsair Finance (Ireland) No. 8 Ltd.
US$50 mil floating-rate
subordinated secured notes
series 1 NR BB+(sf) Transaction
unwound
DCC-Dexia Crediop per la
Cartolarizzazione S.r.l.
EUR2.346-bil floating-rate
notes series 2008-1 NR BB-(sf) Transaction
unwound
Helix Capital (Jersey) Ltd.
EUR15 mil PowerTranche
partial kicker floating-rate
managed synthetic CDO notes
series 2006-6 NR CCC-(sf) Early
retirement of
notes
Helix Capital (Jersey) Ltd.
EUR77-mil PowerTranche partial
kicker floating-rate managed
synthetic CDO notes series
2006-15 NR A-(sf) Early
retirement of
notes
Ionia Capital PLC
EUR47.5 mil fixed- and
floating-rate credit-linked
notes series 2006-2 NR CCC-(sf) Notes matured
as per
scheduled
maturity
Ionia Capital PLC
EUR47.5 mil fixed- and
floating-rate credit-linked
notes series 2006-2 NR CCC-(sf) Notes matured
as per
scheduled
maturity
Ionia Capital PLC
EUR47.5 mil fixed- and
floating-rate credit-linked
notes series 2006-2 NR CCC-(sf) Notes matured
as per
scheduled
maturity
Ionia Capital PLC
EUR47.5 mil fixed- and
floating-rate credit-linked
notes series 2006-2 NR CCC-(sf) Notes matured
as per
scheduled
maturity
Khamsin Credit Products
(Netherlands) II B.V.
AUD15 mil floating-rate
managed credit-linked notes
(Orient IC-Xpress) series 25 NR CCC-(sf) Notes fully
repurchased and
cancelled
Khamsin Credit Products
(Netherlands) II B.V.
AUD10 mil Silver Bell Long-Short
floating-rate credit-linked
notes series 7 D(sf) CC(sf) Notes fully
repurchased and
cancelled
Saphir CDO (Ireland) PLC
US$120 mil floating-rate
secured managed portfolio
credit-linked notes series 4 NR BBBsrp(sf) Transaction
unwound
Signum Finance II PLC
EUR20 mil Class A variable-rate
notes series 2007-04 NR AAA(sf) Notes fully
repurchased
and cancelled
Xelo PLC
SEK32 mil secured limited-
recourse credit-linked variable
notes series 2007 (Dunlin 3) NR CCC-(sf) Notes fully
repurchased
and cancelled
* The rating being lowered to 'D' will remain at 'D' for 30 days
before the withdrawal becomes effective.
NR - Not rated.
* Moody's: EMEA Telecom Service Sector Remains on Neg. Outlook
--------------------------------------------------------------
Despite anticipated revenue stabilization in 2014, the EMEA
telecommunications service sector will remain on negative outlook
due to the slow pace and uncertain sustainability of the revenue
recovery, says Moody's Investors Service in an industry outlook
published.
"While we expect revenues to stabilize or marginally decline by
0% to -0.5% in 2014, it is not clear how sustainable any recovery
will be," says Carlos Winzer, a Senior Vice President in Moody's
Corporate Finance group and author of the report. "We have had a
negative outlook on the sector since November 2011 and would
expect to see a predictable and sustainable 1% to 3% annual
revenue growth to make it stable," adds Mr. Winzer.
Moody's expects that prices in some of the most competitive
markets will continue to drop as incumbents fight to keep their
market share positions and as improving, but still weak,
macroeconomic conditions keep consumers price sensitive.
Integrated incumbent operators such as Deutsche Telekom, Orange,
KPN, Telefonica and Portugal Telecom will fare better than
companies with just mobile or fixed offerings because they can
offer bundled voice and data services.
Moody's estimates that the industry's average EBITDA margin will
be down approximately 1% in 2013, but will probably stabilize in
2014.
The rating agency forecasts an average capex/revenue ratio (as
adjusted by Moody's) of approximately 18% or higher in 2014.
Vodafone's investment plans may force other European operators to
follow suit and increase network spending. This will pressure
incumbents with limited financial flexibility or challengers with
high leverage such as Wind.
Moody's expects European Union regulators to focus on the gradual
phasing out of roaming rates but this will have a minimal
negative impact on Moody's-rated issuers. It is not clear to what
extent regulators in Europe will allow further industry
consolidation and how favourable regulation will be towards
future fibre investments.
While specific in-market consolidation deals may be completed in
the next 12-18 months, Moody's does not expect a wave of cross-
border consolidation. The four largest integrated incumbent
telcos -- Telefonica, Deutsche Telekom, Orange and Telecom
Italia -- are either in selling mode or do not have much
flexibility or appetite to lead this process.
Few options remain to support financial strength in 2014, says
Moody's. Either the revenue trend needs to improve or some
companies will have to issue equity to strengthen their balance
sheets.
That said, Moody's anticipates that refinancing challenges will
be manageable through 2015. Most companies are pre-funded two
years in advance and most have ample liquidity supported by
strong medium and long-term committed bank facilities with
limited restrictive covenants.
Moody's says South African, Russia as well as Middle East, market
trends are more stable than in Europe. The rating agency expects
Russia's "big three" rated mobile operators' MegaFon, MTS and
VimpelCom to maintain single-digit revenue growth driven by
strong demand for mobile data.
GA Europe Valuations Limited, a subsidiary of Great American
Group, Inc, has announced the addition of Peter Bache and staff
from BSVA Limited.
BSVA Limited specializes in the valuation and disposition of
machinery and business assets across the UK and mainland Europe,
and offers agency, valuation, professional and business recovery
services.
* Peter Bache & BSVA Staff Join GA Europe Valuations
----------------------------------------------------
GA Europe Valuations Limited, a subsidiary of Great American
Group, Inc., has announced the addition of Peter Bache and staff
from BSVA Limited. BSVA Limited specializes in the valuation and
disposition of machinery and business assets across the UK and
mainland Europe, and offers agency, valuation, professional and
business recovery services.
Led by Peter Bache, BSVA has an infrastructure and specialties
that complement the current structure of GA in the UK and Europe.
"Peter and his staff will greatly augment our valuations
capability in the European marketplace as we seek to grow our
operations to help service the expanding European appraisal
market," said Gordon Titley, Head of Valuations for GA Europe
Valuations Limited.
Mr. Bache's leadership and presence in Europe are expected to
enhance GA's industrial disposition services given his breadth of
experience.
"I am delighted to join such a dynamic organization and look
forward to driving the continued growth of both the appraisal and
industrial disposition services divisions," said Mr. Bache.
"There's huge potential to deliver a differentiated,
high-quality, valuation and auction product across Europe,
furthering GA's successes in that market."
In his new role as director of appraisals, Mr. Bache will be
responsible for continuing to build a team of machinery and real
estate appraisers while also providing auction and disposition
work supporting the lending and restructuring community.
GA's Advisory and Valuation Services division conducts thousands
of appraisals per year representing hundreds of billions of
dollars in assets annually. The company provides inventory
appraisal reports for asset-based lenders, turnaround management
professionals, accounting and private equity firms around the
world. Services include initial valuation, collateral
monitoring, asset management, and merger and acquisition advisory
services for all types of businesses.
About GA Europe Valuations Limited
Based in the United Kingdom and focusing on European business, GA
Europe Valuations Limited -- http://www.gaevaluations.co.uk--
delivers appraisal services that accurately reflect the recovery
value of assets such as stock, plant and machinery, accounts
receivable, and intellectual property. The company is on the
panel of all primary lenders and is a trusted partner to banks,
private equity houses, and asset based lenders.
About BSVA Limited
BSVA offers over 60 years of combined Property and Plant and
Machinery expertise on a national and international basis.
BSVA's market knowledge, experience and professional staff ensure
clients' requirements are best met by delivering outstanding
service while adding value to clients' business and property
assets. BSVA staff are specialists in the valuation and disposal
of machinery and business assets across the UK (and into mainland
Europe) together with agency, valuation, professional and
business recovery services. BSVA applies the highest standards of
professionalism, with all staff adopting the regulatory framework
of the Royal Institution of Chartered Surveyors. All fee-earning
staff are FRICS or MRICS qualified Chartered Surveyors and are
registered under the RICS Valuer Registration Scheme.
About Great American Group, Inc.
Great American Group -- http://www.greatamerican.com-- is a
provider of asset disposition and auction solutions, advisory and
valuation services, capital investment, and real estate advisory
services for an extensive array of companies. A trusted
strategic partner at every stage of the business lifecycle, Great
American Group efficiently deploys resources with sector
expertise to assist companies, lenders, capital providers,
private equity investors and professional service firms in
maximizing the value of their assets. The company has in-depth
experience within the retail, industrial, real estate,
healthcare, energy and technology industries. The corporate
headquarters is located in Woodland Hills, Calif. with additional
offices in Atlanta, Boston, Charlotte, N.C., Chicago, Dallas,
Melville, N.Y., New York, Norwalk, Conn., San Francisco, London,
Milan and Munich.
* BOOK REVIEW: The Oil Business in Latin America: The Early Years
-----------------------------------------------------------------
Author: John D. Wirth Ed.
Publisher: Beard Books
Softcover: 282 pages
List price: $34.95
Review by Gail Owens Hoelscher
Buy a copy for yourself and one for a colleague on-line at
http://is.gd/DvFouR
This book grew out of a 1981 meeting of the American Historical
Society. It highlights the origin and evolution of the state-
owned petroleum companies in Argentina, Mexico, Brazil, and
Venezuela.
Argentina was the first country ever to nationalize its
petroleum industry, and soon it was the norm worldwide, with the
notable exception of the United States. John Wirth calls this
phenomenon "perhaps in our century the oldest and most
celebrated of confrontations between powerful private entities
and the state."
The book consists of five case studies and a conclusion, as
follows:
* Jersey Standard and the Politics of Latin American Oil
Production, 1911-30 (Jonathan C. Brown)
* YPF: The Formative Years of Latin America's Pioneer State
Oil Company, 1922-39 (Carl E. Solberg)
* Setting the Brazilian Agenda, 1936-39 (John Wirth)
* Pemex: The Trajectory of National Oil Policy (Esperanza
Duran)
* The Politics of Energy in Venezuela (Edwin Lieuwen)
* The State Companies: A Public Policy Perspective (Alfred
H. Saulniers)
The authors assess the conditions at the time they were writing,
and relate them back to the critical formative years for each of
the companies under review. They also examine the four
interconnecting roles of a state-run oil industry and
distinguish them from those of a private company. First, is the
entrepreneurial role of control, management, and exploitation of
a nation's oil resources. Second, is production for the private
industrial sector at attractive prices. Third, is the
integration of plans for military, financial, and development
programs into the overall industrial policy planning process.
Finally, in some countries is the promotion of social
development by subsidizing energy for consumers and by promoting
the government's ideas of social and labor policy and labor
relations.
The author's approach is "conceptual and policy oriented rather
than narrative," but they provide a fascinating look at the
politics and development of the region. Mr. Brown provides a
concise history of the early years of the Standard Oil group and
the effects of its 1911 dissolution on its Latin American
operations, as well as power struggles with competitors and
governments that eventually nationalized most of its activities.
Mr. Solberg covers the many years of internal conflict over oil
policy in Argentina and YPF's lack of monopoly control over all
sectors of the oil industry. Mr. Wirth describes the politics
and individuals behind the privatization of Brazil's oil
industry leading to the creation of Petrobras in 1953. Mr. Duran
notes the wrangling between provinces and central government in
the evolution of Pemex, and in other Latin American countries.
Mr. Lieuwin discusses the mixed blessing that oil has proven for
Venezuela., creating a lopsided economy dependent on the ups and
downs of international markets. Mr. Saunders concludes that many
of the then-current problems of the state oil companies were
rooted in their early and checkered histories." Indeed, he says,
"the problems of the past have endured not because the public
petroleum companies behaved like the public enterprises they
are; they have endured because governments, as public owners,
have abdicated their responsibilities to the companies."
John D. Wirth is Gildred Professor of Latin American Studies at
Standford University.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than US$3 per
share in public markets. At first glance, this list may look
like the definitive compilation of stocks that are ideal to sell
short. Don't be fooled. Assets, for example, reported at
historical cost net of depreciation may understate the true value
of a firm's assets. A company may establish reserves on its
balance sheet for liabilities that may never materialize. The
prices at which equity securities trade in public market are
determined by more than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Thursday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/booksto order any title today.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Valerie U. Pascual, Marites O. Claro, Rousel Elaine T. Fernandez,
Joy A. Agravante, Ivy B. Magdadaro, Frauline S. Abangan and Peter
A. Chapman, Editors.
Copyright 2013. All rights reserved. ISSN 1529-2754.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Europe subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for
members of the same firm for the term of the initial subscription
or balance thereof are US$25 each. For subscription information,
contact Peter Chapman at 215-945-7000 or Nina Novak at
202-241-8200.
* * * End of Transmission * * *