/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/140905.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, September 5, 2014, Vol. 15, No. 176 Headlines F R A N C E SNCM: EU Rejects France's Appeal on Illegal State Aid G E O R G I A GEORGIA: Institutional Strength Supports Moody's Ba3 Bond Rating G R E E C E PASAL: Files for Creditor Protection; To Implement Restructuring L U X E M B O U R G ESPIRITO SANTO: Finma to Investigate Banque Privee Unit HARVEST CLO I: S&P Raises Ratings on 2 Note Classes to 'BB+' N E T H E R L A N D S * NETHERLANDS: Company Bankruptcy Rate to Fall by 10% This Year U N I T E D K I N G D O M CO-OPERATIVE GROUP: Names R. Pennycook as Permanent Chief CO-OPERATIVE GROUP: Interim Results Lists Profit Thru July 2014 CO-OPERATIVE GROUP: Sells Sunwin Business to Cardtronics DECO 8 - UK: S&P Lowers Rating on Class D Notes to 'CCC-' GELTSDALE BREWERY: Assets Sold Through Administration, Jobs Lost INVERCLYDE: McGill's Buses Interested in Buying Shipyard PHOSPHORUS HOLDCO: Moody's Puts B3 CFR on Review for Downgrade THINK APARTMENTS: Denies Going Into Administration YMCA WALES: In Administration; 18 Jobs at Risk X X X X X X X X * BOOK REVIEW: Risk, Uncertainty and Profit ********* =========== F R A N C E =========== SNCM: EU Rejects France's Appeal on Illegal State Aid ----------------------------------------------------- Reuters reports that the Court of Justice of the European Union related in a Sept. 4 statement that it rejected an appeal by the French state against a ruling forcing Societe Nationale Maritime Corse Mediterranee (SNCM) to pay back EUR220 million of illegal state aid. SNCM, partially owned by water group Veolia, received the aid during its privatization in 2006, and got European Commission approval for it at the time, Reuters recounts. In 2012, the ECJ's first-level General Court ordered it to repay the aid following a complaint by SNCM competitor Corsica Ferries, Reuters relays. In a separate report, Reuters' Geert De Clercq relates that Veolia has long said that the only way to protect SNCM from the claims is to go under Chapter 11-style court protection, and continue the viable part of the business under a new legal structure, with new shareholders and with part of the company's staff and assets. The French state, which owns a direct 25% stake in SNCM besides its indirect stake via CDC, came round to this view in July, but has promised the unions not to seek court protection before the end of October, Reuters recounts. A source familiar with the situation told Reuters that if SNCM runs out of cash to pay salaries and fuel before then, court protection could be necessary before that date. Transdev has said it will put no more new funds into SNCM and efforts to find a buyer have foundered, according to Reuters. Norway's Siem Shipping and Mexico's Baja Ferries have considered buying SNCM, on condition of guarantees that they would not have to repay the aid, which its shareholders cannot give, Reuters notes. The long-running SNCM saga has stopped Veolia from selling part of its Transdev stake to CDC, as the state bank does not want to take over majority control of Transdev as long as it owns the troubled ferry operator, whose unions have launched several strike actions in the past years, Reuters states. As reported by The Troubled Company Reporter-Europe on July 7, 2014, Reuters related that SNCM has racked up cumulative losses of EUR250 million over the past decade despite subsidies it receives from French authorities. SNCM is a France-Corsica ferry operator. The company is owned 66% by Transdev, a public transport joint venture between water and waste group Veolia Environnement and state-bank CDC. ============= G E O R G I A ============= GEORGIA: Institutional Strength Supports Moody's Ba3 Bond Rating ---------------------------------------------------------------- Moody's Investor Service said in a report it issued that Georgia's Ba3 rating (positive outlook) accounts for the small and volatile nature of the economy as well as its low wealth levels, though an attractive business environment means its growth prospects are improving, especially with its recent signing of a Deep and Comprehensive Free Trade Area (DCFTA) with the EU which enters into force in September 2014. The rating agency's report is an update to the markets and does not constitute a rating action. Moody's says Georgia's Ba3 government bond rating remains supported by (1) the strength of the country's institutional capacity and the pro-business operating environment, both of which have supported economic development over the last decade; and (2) the government's relatively strong balance sheet and prudent macroeconomic policy, having benefitted from the support provided by international institutions such as the IMF. Moreover, the entering into force of the DCFTA in September 2014 should improve Georgia's medium-term economic prospects. The latter was a major driver of Moody's decision to change the outlook on the Ba3 sovereign rating to positive from stable on 22 August 2014. However, Moody's notes that Georgia remains a low-income country with an economic model that remains heavily dependent on external funding to deliver growth, as domestic savings remain low, albeit improving. As a result, the Georgian economy's external vulnerabilities have increased alongside high growth rates, as reflected by large current account deficits and high external debt. Georgia is also susceptible to geopolitical risk associated with its persistent tensions with Russia since the 2008 conflict. "The main challenge for the Georgian authorities is to ensure healthy economic growth over the long term, while simultaneously reducing external vulnerabilities," says Lucie Villa, an Assistant Vice President in Moody's sovereign team. "With the re- orientation of budget priorities, expenditure has marginally shifted from capital formation to social and, in particular, health care-related expenditures, which risks limiting fiscal flexibility going forward." Public debt is not a major credit concern given that it is relatively low at 32% of GDP in 2013, with interest charges taking up to 3.2% of the government revenue; loans on favorable terms represent 72% of the debt. Improved resiliency of Georgia's balance of payments would generate upward pressure on the rating. This would include (1) a dissipation of the regional risks related to the developments of the Russia-Ukraine crisis; or (2) the materialization of the economic prospects arising from the DCFTA. Given the positive outlook, downward pressure on the rating is unlikely. However, the outlook would change if the external vulnerabilities and geopolitical event risks were to materialize, for instance, on the back of an intensification of the Russia-Ukraine crisis, which would substantially affect Georgia's economy and external position. =========== G R E E C E =========== PASAL: Files for Creditor Protection; To Implement Restructuring ---------------------------------------------------------------- ANA-MPA reports that Pasal on Wednesday, Sept. 3, filed for protection from its creditors seeking to promote a restructuring program. In an announcement, the company said that despite a general adverse condition in the country and the real estate market, Pasal has no overdue debt to its workers, creditors, the Greek state and pension funds, ANA-MPA relates. According to ANA-MPA, Pasal intends to implement a restructuring program, in cooperation with creditor banks, aimed at rescheduling its bank debt to better exploit its real estate investment portfolio and to take advantage of its equity participation in Trastor. The company said its actions will affect the operation of its subsidiaries, its investment program and its transactions with third parties, ANA-MPA notes. Pasal is a real estate company based in Greece. =================== L U X E M B O U R G =================== ESPIRITO SANTO: Finma to Investigate Banque Privee Unit ------------------------------------------------------- Chad Bray at The New York Times reports that a Swiss financial regulator said on Sept. 3 it had initiated enforcement proceedings against a Swiss bank with ties to the Espirito Santo family's troubled group of companies. According to The New York Times, the Swiss Financial Market Supervisory Authority, or Finma, said it was investigating the role of Banque Privee Espirito Santo in the distribution of securities and financial products of one of the family companies. Banque Privee Espirito Santo, based in Lausanne, Switzerland, is owned by the Esp〉ito Santo Financial Group, which sought creditor protection this year over its exposure to the financial struggles of its corporate parent. On Wednesday, Finma said it was examining, in part, "whether breaches of supervisory law occurred" at Banque Privee Espirito Santo, which is itself undergoing a voluntary liquidation, The New York Times relates. "The influence of the owners of the bank on procedures in Switzerland will also be examined," The New York Times quotes the regulator as saying. Finman, as cited by The New York Times, said that the inquiry was started in August. A spokeswoman for Banque Privee Espirito Santo confirmed on Wednesday that the bank had received notice of an enforcement action by Finma and said it planned to work closely with the regulator on the inquiry, The New York Times relays. The regulator said it had appointed an independent third party to examine issues at Banque Privee Esp〉ito Santo, The New York Times notes. Since the bailout of Banco Espirito Santo in August, auditors and regulators have been sifting through the accounts and documentation linked to transactions struck by the family group in the run-up to bank's collapse, The New York Times discloses. They suspect financial crimes ranging from accounting fraud to insider trading and are looking for ways to help recover some of the outstanding debt, The New York Times states. The forensic audit of the bank comes as shareholders who stand to lose out in the bailout have been preparing lawsuits against the former management, as well as challenging the split of assets made between the "healthy" Novo Banco and the "bad bank" in which the troubled loans were placed, The New York Times notes. About Espirito Santo Espirito Santo Financial Group SA is the owner of about 20% of Banco Espirito Santo SA. Banco Espirito Santo is a private Portuguese bank based in Lisbon, Portugal. In August 2014, Banco Espirito Santo was split into "good" and "bad" banks as part of a EUR4.9 billion rescue of the distressed Portuguese lender that protects taxpayers and senior creditors but leaves shareholders and junior bondholders holding only toxic assets. A total of EUR4.9 billion in fresh capital is being injected into this "good bank", which will subsequently be offered for sale. It has been renamed "Novo Banco", meaning new bank, and will include all BES's branches, workers, deposits and healthy credit portfolios. Also in August 2014, Espirito Santo Financial Portugal, a unit fully owned by Espirito Santo Financial Group, filed under Portuguese corporate insolvency and recovery code. In August 2014, Espirito Santo Financiere SA, another entity of troubled Portuguese conglomerate Espirito Santo International SA, filed for creditor protection in Luxembourg. In July 2014, Portuguese conglomerate Espirito Santo International SA filed for creditor protection in a Luxembourg court, saying it is unable to meet its debt obligations. HARVEST CLO I: S&P Raises Ratings on 2 Note Classes to 'BB+' ------------------------------------------------------------ Standard & Poor's Ratings Services raised its credit ratings on Harvest CLO I S.A.'s class B-1, B-2, C, D, and Q combination notes. At the same time, S&P has affirmed its rating on the class E notes. Harvest CLO I is a 2004-vintage cash flow collateralized debt obligation (CDO) transaction that securitizes loans granted to primarily speculative-grade corporate firms. 3i Debt Management Investments Ltd. is the transaction manager. The rating actions follow S&P's assessment of the transaction's performance. S&P used data from the trustee report (dated June 30, 2014), performed S&P's credit and cash flow analysis, and took into account recent transaction developments. The available credit enhancement for all classes of notes has improved as a result of deleveraging. The pool's proportion of defaulted assets (rated 'CC','C', 'SD' [selective default], or 'D'), as well as the proportion of 'CCC' rated assets (rated 'CCC+', 'CCC', and 'CCC-') have increased since S&P's previous review on Sept. 13, 2012. The pool's weighted-average spread has also increased since then. The class E notes are currently failing their par value tests. In S&P's previous review, all of the tranches were passing their par coverage tests. S&P factored in the above observations in its cash flow analysis, which S&P conducted by applying its corporate cash flow CDO criteria, to determine the break-even default rate. S&P used the reported portfolio balance that it considered to be performing, the principal cash balance, the current weighted-average spread, and the weighted-average recovery rates that S&P considered to be appropriate. S&P incorporated various cash flow stress scenarios using various default patterns, levels, and timings for each liability rating category, in conjunction with different interest rate stress scenarios. At the same time, S&P conducted its credit analysis to determine the scenario default rate (SDR), using Standard & Poor's CDO Evaluator 6.0.1 to determine the portfolio's expected default rate at each rating level, which S&P then compared with the respective BDR. "We ran our supplemental tests, where we analyze the pool's concentrations regarding the largest obligor, industry, and region, to help address the event and model risk that our credit and cash flow analysis does not capture. Taking into account our credit and cash flow analysis and the application of the supplemental tests, we consider the available credit enhancement for the B-1, B-2, C, D, and class Q combination notes to be commensurate with higher ratings. We have therefore raised our ratings on these classes of notes," S&P said. Although S&P's cash flow analysis suggested a higher rating on the class E notes, its largest obligor default test constrained its rating on the class E notes at the currently assigned rating level. S&P has therefore affirmed its rating on the class E notes. S&P has analyzed the transaction's exposure to its derivative counterparties, and concluded that it is currently sufficiently limited, so as not to affect the ratings that S&P has assigned. RATINGS LIST Harvest CLO I S.A. EUR514.3 mil fixed- and floating-rate notes Rating Rating Class Identifier To From B-1 41753AAB6 AAA (sf) AA (sf) B-2 41753AAL4 AAA (sf) AA (sf) C 41753AAC4 AA+ (sf) BBB+ (sf) D 41753AAD2 BB+ (sf) B+ (sf) E 41753AAE0 CCC+ (sf) CCC+ (sf) Q (combo) 41753AAH3 BB+ (sf) B+ (sf) ===================== N E T H E R L A N D S ===================== * NETHERLANDS: Company Bankruptcy Rate to Fall by 10% This Year --------------------------------------------------------------- DutchNews.nl, citing credit insurer Atradius reports that the number of companies going bust in the Netherlands is expected to fall by 10% this year, after two years of successive growth. According to DutchNews.nl, Atradius said the bankruptcy rate fell by 12% in the first six months of the year and this trend is likely to continue in the second half. "Economic conditions are improving and that will translate into fewer companies going bankrupt," DutchNews.nl company quotes economist John Lorie as saying. =========================== U N I T E D K I N G D O M =========================== CO-OPERATIVE GROUP: Names R. Pennycook as Permanent Chief --------------------------------------------------------- The Board of The Co-operative Group related in a Sept. 4, 2014 public statement that Richard Pennycook has been appointed as Group Chief Executive, with immediate effect. Richard was previously Interim Group Chief Executive, a role he had held since March this year. He initially joined the Group in June 2013 as Finance Director, before being appointed Chief Operating Officer. In the statement, Ursula Lidbetter, Chair of The Co-operative Group, said: "The Co-operative Group needs strong, talented, committed leadership as it starts on the next phase of its recovery and I am delighted that Richard has accepted the role of Group Chief Executive. Last week, we secured the overwhelming approval of our members for far-reaching governance reform. We are now moving forward with the work to bring to life the new structure. "It is against that backdrop that the Board decided to act with speed, and in the interest of the Group and its people, by appointing a permanent Group Chief Executive quickly and with immediate effect. We have seen the first-class job that Richard has done over the last six months, in challenging circumstances, leading a strong executive team. He has a commitment to co-operative values and principles and has built a strong rapport with our members. We are clear that he is the right person to continue the process of rebuilding the Group." Also in the statement, Mr. Pennycook, Group Chief Executive, The Co-operative Group, said: "I am delighted to have the chance to lead The Co-operative Group through the crucial job of rebuilding the business. We have taken major steps forward over the last six months, securing governance reform and repairing our balance sheet, but we have much to do to return the Group to full financial health and improve the performance of our businesses. I lead a talented executive team that has started this vital process and together we will continue our work to restore the Group to its rightful place at the heart of communities. With our members' continued help and the ongoing support of our customers and colleagues, I am confident that The Co-operative Group has a strong and exciting future ahead of it." About Co-operative Group Founded in 183, The Co-operative Group is UK's largest mutual business owned by nearly 8 million members. The consumer cooperative organization is widely known as "The Co-op." It has a diverse range of retail businesses, which include food, financial services, funeral care, legal services and online electricals. It operates 4,500 retail outlets, employs about 87,000 people, and has an GBP11 billion annual turnover. In May 2013, the Group mulled the sale of a GBP2 billion loan portfolio after Moody's downgraded the rating on the Group's banking arm to "junk" status and raised concerns that the division needed a government bail-out. This was also around the time Euan Sutherland took over Peter Marks as chief executive. Euan Sutherland eventually resigned in March 2014, saying that the mutual is "ungovernable." On Aug. 30, 2014, members approved board reforms. About 80% of member representatives voted to replace the existing board with a plc-style body dominated by independent directors. With this new development, the number of board members is expected to be decreased by 50%. In 2014, the Group sold its pharmacy unit, The Co-operative Pharmacy, to Bestway Group for GBP620 million; and its farming business, Co-operative Farms, to Wellcome Trust for GBP249 million -- all in an effort to reduce debt. The Group posted a GBP2.5 billion (US$4.2 billion) loss in 2013, with debts aggregating GBP1.4 billion at the end of last year. CO-OPERATIVE GROUP: Interim Results Lists Profit Thru July 2014 --------------------------------------------------------------- Co-operative News' Anthony Murray relates that The Co-operative Group has returned to profit following its biggest ever loss of GBP2.5 billion, reported earlier this year. In interim results for the 26 weeks to July 5, the Group announced an operating profit of GBP43 million (2013: GBP105 million) and turnover of GBP5.1 billion (2013: GBP5.3 billion). Its 2013 GBP2.5 billion loss was attributed to the disposal of the Co-operative Bank (GBP1.44 billion) and the write-down of the 2009 acquisition of Somerfield (GBP226 million), Co-operative News relates. "We took the tough decisions to re-shape our Group to ensure it is on a sustainable footing and the disposals of our pharmacy, farms and Sunwin Services businesses as part of this will repair our balance sheet," Co-operative News cites newly appointed permanent chief executive Richard Pennycook as saying. Food generated the largest profit of GBP107 million (2013: GBP117 million), Co-operative News discloses. Funerals was the only other business division to turn in a profit of GBP35 million (2013: GBP42 million), Co-operative News notes. General insurance reported a GBP7 million loss (2013: GBP29 million) and sales decreased to GBP189 million (2013: GBP245 million), which was blamed on the impact of increased claims following "adverse weather conditions" earlier this year and a competitive market for new business, according to Co-operative News. Legal services attributed a loss of GBP5 million (2013: GBP3 million) to a refocused strategy, which also saw sales decline to GBP13 million (2013: GBP18 million), Co-operative News states. "Our Group strategy is to build on our existing strengths as a convenience food retailer and to optimize the performance of our new Consumer Services Division, comprising of Funeralcare, General Insurance and Legal Services," Co-operative News quotes Mr. Pennycook as saying. "We are now in a position to rebuild and restore the Group and can look to the future with greater confidence. "At the same time, much remains to be done. These results clearly reflect an organization in transition and show the scale of work necessary to restore the Group to full financial health. Underlying profitability in the business has been curtailed by the deliberate actions we are taking to implement our detailed rebuild plan and to face into the tough trading conditions prevailing in the markets in which we operate." The Group continues to support the Co-operative Bank, Co- operative News notes. During the six months it reported a profit of GBP25 million for its share in the Bank, of which it owns 20.2%, by Co-operative News discloses. As part of the recapitalization plan, payments were made of GBP50 million at the end of January and GBP100 million in June with remaining GBP163 million to be transferred before the end of 2014, Co-operative News relays. About Co-operative Group Founded in 183, The Co-operative Group is UK's largest mutual business owned by nearly 8 million members. The consumer cooperative organization is widely known as "The Co-op." It has a diverse range of retail businesses, which include food, financial services, funeral care, legal services and online electricals. It operates 4,500 retail outlets, employs about 87,000 people, and has an GBP11 billion annual turnover. In May 2013, the Group mulled the sale of a GBP2 billion loan portfolio after Moody's downgraded the rating on the Group's banking arm to "junk" status and raised concerns that the division needed a government bail-out. This was also around the time Euan Sutherland took over Peter Marks as chief executive. Euan Sutherland eventually resigned in March 2014, saying that the mutual is "ungovernable." On Aug. 30, 2014, members approved board reforms. About 80% of member representatives voted to replace the existing board with a plc-style body dominated by independent directors. With this new development, the number of board members is expected to be decreased by 50%. In 2014, the Group sold its pharmacy unit, The Co-operative Pharmacy, to Bestway Group for GBP620 million; and its farming business, Co-operative Farms, to Wellcome Trust for GBP249 million -- all in an effort to reduce debt. The Group posted a GBP2.5 billion (US$4.2 billion) loss in 2013, with debts aggregating GBP1.4 billion at the end of last year. CO-OPERATIVE GROUP: Sells Sunwin Business to Cardtronics -------------------------------------------------------- The Co-operative Group on Sept. 2 disclosed that it has entered into a definitive agreement to sell its Sunwin Services Group business to Cardtronics for a total consideration of up to GBP41.5 million, payable in cash. The transaction is expected to complete in November 2014, following the fulfillment of a number of required steps to separate the Sunwin Services Group business from The Co-operative Group. The Sunwin Services Group includes the following services: (1) Cash & Valuables in Transit, (2) ATM Support, and (3) Sunwin Managed Security. All 1,500 Sunwin Services Group colleagues will transfer under TUPE regulations to Cardtronics who will also take on the Head Office in Bradford and 14 regional depots. The Co-operative Group has also entered into a commercial contract with Cardtronics for the operation of the ATM estate within The Co-operative Food stores, commencing no later than January 2016. Richard Pennycook, Group Chief Executive said: "I am pleased that we have reached agreement with Cardtronics for the sale of the Group's Sunwin Services Group business. Cardtronics is a world-leader in managing ATMs, and the sale to this organization will result in continued excellent service levels to those businesses and individuals that use their products and services. Sunwin Services Group and its employees have delivered an excellent level of service, and I have no doubt the business will continue to develop further." Pinsent Mason is acting as legal adviser to the Group on this transaction. According to The Guardian's Sean Farrell, Cardtronics said it could start installing new machines immediately. A Co-op spokesman said any existing and new cash machines operated by Cardtronics would continue to be free to use, The Guardian relates. Cardtronics said it would pay the Co-op GBP35 million in stages and that depending on the transfer of the existing cash machines, it could pay an extra GBP6.5 million, The Guardian notes. About Co-operative Group Founded in 183, The Co-operative Group is UK's largest mutual business owned by nearly 8 million members. The consumer cooperative organization is widely known as "The Co-op." It has a diverse range of retail businesses, which include food, financial services, funeral care, legal services and online electricals. It operates 4,500 retail outlets, employs about 87,000 people, and has an GBP11 billion annual turnover. In May 2013, the Group mulled the sale of a GBP2 billion loan portfolio after Moody's downgraded the rating on the Group's banking arm to "junk" status and raised concerns that the division needed a government bail-out. This was also around the time Euan Sutherland took over Peter Marks as chief executive. Euan Sutherland eventually resigned in March 2014, saying that the mutual is "ungovernable." On Aug. 30, 2014, members approved board reforms. About 80% of member representatives voted to replace the existing board with a plc-style body dominated by independent directors. With this new development, the number of board members is expected to be decreased by 50%. In 2014, the Group sold its pharmacy unit, The Co-operative Pharmacy, to Bestway Group for GBP620 million; and its farming business, Co-operative Farms, to Wellcome Trust for GBP249 million -- all in an effort to reduce debt. The Group posted a GBP2.5 billion (US$4.2 billion) loss in 2013, with debts aggregating GBP1.4 billion at the end of last year. DECO 8 - UK: S&P Lowers Rating on Class D Notes to 'CCC-' --------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit ratings on DECO 8 - UK Conduit 2 PLC's class A2 to D notes. At the same time, S&P has affirmed its ratings on the class A1, E, F, and G notes. Seven of the eight remaining loans are in special servicing. The rating actions follow S&P's review of the credit quality of the eight remaining loans under its European commercial mortgage- backed securities (CMBS) criteria. DECO 8 - UK Conduit 2 closed in April 2006 and was secured by a portfolio of 22 mortgage loans and the senior tranches of three mortgage loans. The initial 22 loans were secured by 75 U.K. commercial properties and 92,464 ground leases. The transaction is currently backed by eight loans with a securitized loan balance of GBP488.7 million. The legal final maturity date for the class A1 and A2 notes is April 2018, and is January 2036 for all other classes of notes. Seven of the eight remaining loans are in special servicing and losses have been assumed in S&P's expected-case scenario for all eight. THE LEA VALLEY LOAN (43.35% OF THE POOL) The Lea Valley loan is the largest loan in the transaction, and has a current securitized loan balance of GBP211.9 million. The loan matures in April 2016. The loan is secured by a portfolio of predominantly secondary U.K. industrial premises, with a concentration in the Northwest of England, Wales, and the Midlands. The April 2014 servicer report stated a total of 27 remaining assets with a vacancy rate of 22.64% and a weighted-average unexpired lease term (WAULT) of 2.82 years. In the April 2014 investor report, the servicer reported a 1.18x loan interest coverage ratio (ICR) and a 234.34% loan-to-value (LTV) ratio, based on a Sept. 2013 valuation of EUR92.0 million. Since the Sept. 2013 valuation, partial asset sales have taken place. There were total net disposal proceeds of GBP7.6 million, of which GBP5.7 million were applied by the issuer to pay down the notes on the April and July 2014 interest payment dates. S&P has assumed losses on the loan in its expected-case scenario. MAPELEY II LOAN (38.71% OF THE POOL) The Mapeley II loan matures in April 2016 and has a current securitized loan balance of GBP189.2 million. The loan is currently in special servicing following a breach of the loan-to- value (LTV) covenant in 2012. The underlying portfolio comprises 16 U.K. secondary office properties. The largest asset comprises the 246,000 square foot Microsoft office campus in Reading, with Microsoft accounting for 31.60% of the total current rental income in the portfolio. The current portfolio occupancy is 84.42%, with a WAULT of 5.57 years. In the April 2014 investor report, the servicer reported a 1.20x loan interest coverage ratio (ICR) and a 140.86% LTV ratio, based on a August 2012 valuation of EUR134.3 million. The special servicer is undertaking an asset-by-asset active management workout of the loan, which includes certain capital improvement works, together with attempting to improve rental income and lease lengths throughout the portfolio. In addition, the special servicer is marketing certain assets for sale. S&P has assumed losses on the loan in its expected-case scenario. FAIRHOLD LOAN (12.68% OF LOAN POOL) The Fairhold loan entered special servicing in March 2013 following a failure to repay at loan maturity on Jan. 20, 2013. The loan has a total securitized balance of GBP61.9 million and a GBP19.8 million B-note. The loan was secured by an initial portfolio of 92,464 ground rent assets on predominantly residential property located throughout the U.K. On the April 2014 interest payment date, the servicer reported that a total of 82,975 ground rent lease interests remain. In the April 2014 investor report, the servicer reported a 1.35x whole loan interest coverage ratio (ICR) and a 100.82% whole LTV ratio, based on a July 2013 valuation of GBP84.9 million. S&P has assumed losses on the loan in its expected-case scenario. ROWAN UK COMMERCIAL PROPERTY LOAN (3.10% OF POOL) The Rowan UK Commercial Property loan has a total securitized balance of GBP15.2 million. It is currently in special servicing following an interest coverage ratio covenant breach and failure to repay at maturity in October 2010. The loan is backed by five secondary multi-let offices, industrial, or retail assets situated in regional U.K. locations. The assets are multi-let with the top five tenants, accounting for about 50% of the total rental income. The occupancy level across all five assets is 88.87%. The special servicer reported the WAULT as 3.42 years. In the April 2014 investor report, the servicer reported a 1.74x loan ICR and a 228.95% LTV ratio, based on 2013 valuations totaling GBP6.6 million. S&P has assumed losses on the loan in its expected-case scenario. OTHER LOANS (2.71% OF POOL) The remaining four loans are known as the Elbank Ltd. Loan, MPH (UK) Loan, Braeside Loan, and Swiftgold Loan. All of the loans are currently in special servicing, with three loans having failed to repay at loan maturity. Each loan is backed by a single commercial property in regional U.K. locations. S&P has reviewed each loan individually and has assumed losses on all four of these loans. RATING ACTIONS S&P's ratings in the transaction address the timely payment of interest and the ultimate payment of principal no later than the April 2018 legal final maturity date for the class A1 and A2 notes, and the Jan. 2036 legal final maturity date for all other classes of notes. Following S&P's review, it considers the available credit enhancement for the class A1 notes to be sufficient to mitigate the risk of principal losses from the underlying loans in a 'AA+' rating stress scenario. However, S&P has made adjustments in its analysis to account for the significant number of defaulted loans and the level of potential expected losses. Therefore, S&P has affirmed its 'AA (sf)' rating on the class A1 notes. In S&P's view, the class A2 to D notes' credit quality has further deteriorated. The available credit enhancement for the class A2, B, C, and D notes is no longer sufficient to address S&P's principal loss expectations under their respective rating level scenarios. S&P believes the class A2 notes are now exposed to principal losses from the underlying loans in its expected-case scenario. S&P has therefore lowered to 'B- (sf)' from 'BB- (sf)' its rating on the class A2 notes. S&P believes the repayment of the class B, C, and D notes is dependent upon favorable economic conditions. Therefore, in line with S&P's criteria for assigning 'CCC' category ratings, it has lowered its ratings on these classes of notes. S&P has affirmed its 'D (sf)' ratings on the class E, F, and G notes as they experienced interest shortfalls on prior payment dates and have had non-accruing interest (NAI) amounts applied or are highly vulnerable to principal losses. RATINGS LIST DECO 8 - UK Conduit 2 PLC GBP630.131 mil commercial mortgage-backed floating-rate notes Rating Rating Class Identifier To From A1 XS0251885603 AA (sf) AA (sf) A2 XS0251886163 B- (sf) BB- (sf) B XS0251886833 CCC+ (sf) B (sf) C XS0251887211 CCC (sf) B- (sf) D XS0251887724 CCC- (sf) CCC (sf) E XS0251889696 D (sf) D (sf) F XS0251890199 D (sf) D (sf) G 243578AH4 D (sf) D (sf) GELTSDALE BREWERY: Assets Sold Through Administration, Jobs Lost ---------------------------------------------------------------- thejournal.co.uk reports that Geltsdale Brewery Limited has entered into administration causing all staff to lose their jobs. Joint administrators Gordon Smythe Goldie -- recovery@taitwalker.co.uk -- and Matthew James Higgins of Tait Walker LLP were appointed on July 25. The administrators spoke to thejournal.co.uk Journal only to confirm that all staff had been redundant and the assets of the firm had been sold. A meeting of creditors was suppose to have taken place last Sept. 2. Geltsdale Brewery Limited, based in the Townfoot Industrial Estate in Brampton, was known for beers such as Brampton Bitter and Cold Fell and had been trading since 2006. INVERCLYDE: McGill's Buses Interested in Buying Shipyard -------------------------------------------------------- Express & Star reports that a total of 70 people were made redundant immediately when it was announced that the Ferguson shipyard in Port Glasgow, Inverclyde, had gone into administration. Sandy and James Easdale, the owners of McGill's Buses, may be able to provide a lifeline for the yard, which was the last commercial shipbuilder on the River Clyde, according to Express & Star. The report notes that the businessmen have expressed an interest in saving the firm, with Sandy Easdale stating: "We have contacted the administrators, KPMG, through our accountants. "This is a highly-skilled workforce and it is a vital business for our area. "With Government assistance, both in Edinburgh and London, I am sure we can secure orders." The report notes that Ferguson Shipbuilders, which dates back to 1902, went into administration following "significant cashflow pressure" in recent months. Blair Nimmo, joint administrator and head of restructuring for KPMG in Scotland, said then that the shipbuilder was a "leading name in the industry with a rich heritage dating back more than 110 years," the report discloses. Mr. Nimmo added: "A lack of significant orders and mounting cashflow pressure has led to the group's inability to continue trading," the report relays. Scottish Finance Secretary John Swinney and Inverclyde Council leader Stephen McCabe led a task force meeting to discuss the future of the ailing shipyard. PHOSPHORUS HOLDCO: Moody's Puts B3 CFR on Review for Downgrade -------------------------------------------------------------- Moody's Investors Service has placed all ratings of Phosphorus Holdco Plc under review for downgrade, including its B3 corporate family rating (CFR), B3-PD probability of default rating (PDR) and Caa2 rating on the GBP205 million PIK toggle notes due 2019. Concurrently, Moody's has also placed under review for downgrade all ratings on debt instruments issued by Phones4u Finance plc, including the B3 rating on the GBP430 million senior secured notes due 2018 and Ba3 rating on the GBP125 million revolving credit facility (RCF) due 2017. Ratings Rationale The review for downgrade has been prompted by Phones4u's announcement on September 1, 2014 that its network agreement with Vodafone Group Plc (Baa1 stable), will not be renewed when it terminates in February 2015. The scope of this agreement currently represents more than 20% of Phones4u's revenues and gross profits. In addition, the company was already facing the termination of its store-in-store agreement with Dixons Retail plc (B1 positive) in May 2015, putting a further 8% of EBITDA at risk, in the absence of agreements with fresh partners. Phones4u now faces the challenge of replacing the connections and related revenue in respect of Vodafone with connections to other networks in order to continue to cover its store network fixed cost base. Following the Vodafone related announcement, the company has a continuing relationship with only one mobile network operator (MNO), namely EE Limited (EE; Baa2 stable; a joint venture between Deutsche Telekom AG; Baa1 stable -- and Orange; Baa1 stable), selling connections and contracts to EE's three retail brands. The company also has an existing relationship with mobile virtual network operator (MVNO) Virgin Media Inc. (Ba3 stable) and has its own nascent MVNO, Life Mobile. Phones4u's current B3 CFR reflects the highly competitive market in which the company operates, as highlighted by news that Vodafone was strengthening ties with Phones4u's main competitor Dixons Carphone (unrated). Phones4u's ratings also rest upon the expectation that the company will remain an important outlet for MNO partners, an assumption which is jeopardized by the aforementioned announcement. Furthermore, the company's own virtual network LIFE Mobile and new insurance product are at an early stage of development, while Moody's adjusted leverage on a debt/EBITDA basis stood at the upper end of our rating guidance, at 7.5x as of the end of June 2014. However, Moody's expects Phones 4u's liquidity profile to remain adequate for the time being and to continue to be credit supportive. Moody's review will assess the likelihood that Phones4u will be able to replace the revenue and cash flow streams from the Dixons and Vodafone contracts as well as the earnings quality underlying any new contract with existing or potential new partners. The review will also focus on Phones4u's prospective ability to defend its business model and maintain its leading position as an independent mobile phone retailer as competitors' behavior is changing. Accordingly, the review will assess the company's earnings resilience and therefore the suitability of the current ratings relative to future financial metrics. Principal Methodologies The principal methodology used in these ratings was Global Retail Industry published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Phones4u is a leading independent mobile phone retailer. As of June 30, 2014, the group operated 720 stores across the UK, of which 160 are concessions within electrical retail stores run by Dixons Retail plc. Phones4u sells mobile phone connections, handsets and accessories as well as insurance products. The group established its own MVNO Life Mobile in 2013. In the last twelve months ended June 30, 2014, Phones4u reported revenue GBP1.0 billion and EBITDA of GBP85.4 million from continuing operations. THINK APARTMENTS: Denies Going Into Administration -------------------------------------------------- Big Hospitality reports that Think Apartment has denied reports that it has been placed into administration. The firm published a statement saying that some of the properties it operates have experienced ownership problems, resulting in them being placed into administration, but that "this is completely separate from the Think Apartments operating company," according to Big Hospitality. "Following a period of significant growth under their management, the properties managed by Think experienced ownership problems in the autumn of 2013, when loans secured from Irish lenders over a decade ago to develop London aparthotels were called in by the National Asset Management Agency (NAMA) resulting in the administration of some of the property owning companies that Think operates," the statement said. According to an official report to creditors published by Duff & Phelps in December last year, five companies were placed into administration in October 2013: Aparthotels (Bermondsey) Ltd, Aparthotels (Tower Bridge) Ltd, Mazey Properties Ltd, Tower Bridge Road Developments Ltd and Warwick Road Developments Ltd. Big Hospitality relates that the report stated that the companies were wholly owned subsidiaries of London City Group and Holdings Limited (LCGH), which is also Think's parent company. LCGH is owned 99 per cent by Graham Harris, the sole director of both the operating company (Think) and the various property companies owning the buildings managed by Think. Speaking to BigHospitality, Think's managing director Jim Souter confirmed that a number of prop-cos had been placed under the administration of Duff & Phelps, but stressed that it was "a private legal matter between the Irish banking system and the owner", and that these companies were "completely separate legal entities" from Think. "It is not Think Apartments that has been placed into administration, in fact, Think Apartments has been an extremely successful operation company over the past 4.5 years," the report quoted Mr. Souter as saying. "Unfortunately, Think will lose the right to operate these buildings as a result of these properties being taken into administration," Mr. Souter said. YMCA WALES: In Administration; 18 Jobs at Risk ---------------------------------------------- Rupert Hall at WalesOnline reports that YMCA Wales has gone into administration. Administrators from Grant Thornton's Advisory team have been appointed to settle the affairs of the National Council of Young Men's Christian Associations of Wales (YMCA Wales) charitable organisation, WalesOnline relates. According to WalesOnline, Alistair Wardell, head of Grant Thornton's Wales office in Cardiff, will lead the administration, supported by James Stares, director in restructuring for the business advisory specialists. The 18 employees of the charity, which is based across three sites in Swansea, Newgale and Rhayader, are at risk of redundancy while the administrators seek sales for its assets, WalesOnline discloses. YMCA Wales was founded in 1981 and has been providing services to young people and their communities throughout Wales. =============== X X X X X X X X =============== * BOOK REVIEW: Risk, Uncertainty and Profit ------------------------------------------- Author: Frank H. Knight Publisher: Beard Books Softcover: 381 pages List Price: $34.95 Review by Gail Owens Hoelscher Order your personal copy today at http://is.gd/al9gqP The tenets Frank H. Knight sets out in this, his first book, have become an integral part of modern economic theory. Still readable today, it was included as a classic in the 1998 Forbes reading list. The book grew out of Knight's 1917 Cornell University doctoral thesis, which took second prize in an essay contest that year sponsored by Hart, Schaffner and Marx. In it, he examined the relationship between knowledge on the part of entrepreneurs and changes in the economy. He, quite famously, distinguished between two types of change, risk and uncertainty, defining risk as randomness with knowable probabilities and uncertainty as randomness with unknowable probabilities. Risk, he said, arises from repeated changes for which probabilities can be calculated and insured against, such as the risk of fire. Uncertainty arises from unpredictable changes in an economy, such as resources, preferences, and knowledge, changes that cannot be insured against. Uncertainty, he said "is one of the fundamental facts of life." One of the larger issues of Knight's time was how the entrepreneur, the central figure in a free enterprise system, earns profits in the face of competition. It was thought that competition would reduce profits to zero across a sector because any profits would attract more entrepreneurs into the sector and increase supply, which would drive prices down, resulting in competitive equilibrium and zero profit. Knight argued that uncertainty itself may allow some entrepreneurs to earn profits despite this equilibrium. Entrepreneurs, he said, are forced to guess at their expected total receipts. They cannot foresee the number of products they will sell because of the unpredictability of consumer preferences. Still, they must purchase product inputs, so they base these purchases on the number of products they guess they will sell. Finally, they have to guess the price at which their products will sell. These factors are all uncertain and impossible to know. Profits are earned when uncertainty yields higher total receipts than forecasted total receipts. Thus, Knight postulated, profits are merely due to luck. Such entrepreneurs who "get lucky" will try to reproduce their success, but will be unable to because their luck will eventually turn. At the time, some theorists were saying that when this luck runs out, entrepreneurs will then rely on and substitute improved decision making and management for their original entrepreneurship, and the profits will return. Knight saw entrepreneurs as poor managers, however, who will in time fail against new and lucky entrepreneurs. He concluded that economic change is a result of this constant interplay between new entrepreneurial action and existing businesses hedging against uncertainty by improving their internal organization. Frank H. Knight has been called "among the most broad-ranging and influential economists of the twentieth century" and "one of the most eclectic economists and perhaps the deepest thinker and scholar American economics has produced." He stands among the giants of American economists that include Schumpeter and Viner. His students included Nobel Laureates Milton Friedman, George Stigler and James Buchanan, as well as Paul Samuelson. At the University of Chicago, Knight specialized in the history of economic thought. He revolutionized the economics department there, becoming one the leaders of what has become known as the Chicago School of Economics. Under his tutelage and guidance, the University of Chicago became the bulwark against the more interventionist and anti-market approaches followed elsewhere in American economic thought. He died in 1972. ********* 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, and Peter A. Chapman, Editors. Copyright 2014. 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 * * *