/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/141008.mbx T R O U B L E D C O M P A N Y R E P O R T E R E U R O P E Wednesday, October 8, 2014, Vol. 15, No. 199 Headlines C Y P R U S BANK OF CYPRUS: Ackermann Set to Become Non-Executive Chairman G E R M A N Y INA BETEILIGUNGS: Moody's Assigns Ba2 Corp. Family Rating STYROLUTION GROUP: Moody's Assigns '(P)B2' Rating to EUR1BB Loan TELE COLUMBUS: Moody's Assigns '(P)B2' CFR; Outlook Stable TELE COLUMBUS: S&P Assigns 'B+' Prelim. Corp. Credit Rating G R E E C E GREECE: Wants to Retain Access to Bailout Funds Next Year I R E L A N D * IRELAND: Number "Zombie" Companies Rises to 154,000, R3 Says R U S S I A TEMIRBANK JSC: S&P Lowers ST Counterparty Credit Rating to 'C' S P A I N BBVA RMBS 11: Moody's Raises Rating on EUR77MM C Notes to 'Ba3' CAIXA PENEDES PYMES 1: Fitch Cuts Rating on Cl. C Notes to 'CCC' LA SEDA DE BARCELONA: Packaging Unit Attracts Three Bids U K R A I N E CAPE VIEWER: Noble Chartering Selected as Sole Bidder U N I T E D K I N G D O M ARROW GLOBAL: S&P Alters Ratings Outlook to Neg on Capquest Deal CO-OPERATIVE GROUP: FCA Approves Governance Structure Overhaul * UK: New Employment Law Ruling May Spur Scottish Bankruptcies X X X X X X X X * S&P Takes Various Rating Actions on EU Synthetic CDO Deals ********* =========== C Y P R U S =========== BANK OF CYPRUS: Ackermann Set to Become Non-Executive Chairman -------------------------------------------------------------- Martin Arnold at The Financial Times reports that Josef Ackermann is set to become non-executive chairman of Bank of Cyprus in an overhaul of its board of directors proposed by some of its biggest shareholders including Wilbur Ross, the US private equity billionaire. The former Deutsche Bank chief executive leads a new slate of directors being put forward to replace the existing board, which is expected to resign at an annual shareholder meeting on Nov. 20, the FT discloses. The proposal comes only a year after Bank of Cyprus was saved from collapse by an international rescue after the country was buffeted by the Greek debt crisis, the FT notes. In July, the Mediterranean country's biggest lender bolstered its balance sheet by selling EUR1 billion of shares to investors including Mr. Ross and the European Bank for Reconstruction and Development, the FT recounts. Mr. Ross, who represents a group of North American investors owning 17% of the bank, has teamed up with Tyrus Capital, a Monaco-based hedge fund that owns close to 5%, to propose the new board members, the FT relates. Other people put forward to join Bank of Cyprus's board as non-executive directors include Arne Berggren, a former Swedbank executive nominated by the EBRD, and Michael Spanos, a former director of the Central Bank of Cyprus, the FT says. According to the FT, Mr. Ross is planning to become vice-chairman of the bank alongside Vladimir Strzhalkovskiy, a former KGB agent who has been the bank's vice-chairman since last year's international rescue. Next month, Bank of Cyprus shares are due to restart trading more than a year after they were suspended, the FT states. The lender is in talks with the London Stock Exchange and EuronextNYSE about moving its secondary listing from Greece to the UK or the Netherlands next year, according to the FT. One of the biggest challenges facing Bank of Cyprus is the European Central Bank's stress test and asset quality review of the continent's largest lenders, for which results are due to be published on Oct. 26, the FT says. Bank of Cyprus is a major Cypriot financial institution. In terms of market capitalization of 350 million in March 2013, it is the country's biggest bank. As of September 2012, the bank held a 26.7% share of the Cypriot deposit market and a 22.5% share of the Cypriot loan market, making it the largest bank in Cyprus. The Bank of Cyprus Group employs 11,326 staff worldwide. * * * As reported by the Troubled Company Reporter-Europe on July 8, 2014, Fitch Ratings upgraded Bank of Cyprus Public Company Ltd.'s (BoC) Long-term Issuer Default Ratings (IDR) to 'CC' from 'RD' and Hellenic Bank Public Company Limited's (HB) Long-term IDR to 'CCC' from 'RD'. Fitch also upgraded the two banks' Short- term IDR to 'C' from 'RD'. At the same time, the agency affirmed BoC's Viability Rating (VR) at 'cc' and HB's VR at 'ccc'. Fitch said the upgrades of BoC's and HB's IDRs follow the lifting of legal restrictions imposed by the Central Bank of Cyprus on the free movement of capital within Cyprus on May 30, 2014. In particular, capital controls on bank deposits within the country no longer apply. ============= G E R M A N Y ============= INA BETEILIGUNGS: Moody's Assigns Ba2 Corp. Family Rating --------------------------------------------------------- Moody's Investor Service has assigned a Ba2 rating to the proposed senior secured term loan issued by INA Beteiligungsgesellschaft mbH. Concurrently, based on the proposed changes to the borrower group in the new loan agreement, Moody's withdrew the corporate family rating (CFR) of Ba3 and probability of default rating (PDR) of Ba3-PD it had on Schaeffler AG and assigned a Ba3 CFR and Ba3-PD PDR to INA Beteiligungsgesellschaft mbH ("Schaeffler"). Moody's also affirmed Schaeffler's and its guaranteed subsidiaries senior secured debt ratings of Ba2, senior unsecured debt ratings of B1 and junior (secured PIK notes) debt ratings at B1. The outlook on all ratings is stable. Rating Rationale for Instruments Ratings The Ba2 rating on the proposed senior secured term loan reflects the loan's effective pari passu ranking with outstanding senior secured bonds, even though the loan will not rely further on credit support from the 34.2% stake that Schaeffler AG has in Continental AG. For the time being and to ensure pari passu treatment with outstanding senior secured bonds, a guarantee issued from Schaeffler AG will support the new term loan. Moody's, however, notes that Schaeffler may ask senior bondholders to consent to a release of the Schaeffler AG parent guarantee. Once bondholders have agreed to this release, the guarantee will also fall away from the new term loan. When this event occurs, both senior term loan holders and senior bond holders will no longer have access to any Continental shares. Even though the loss of access effectively leads to some deterioration of the senior lenders' position, the senior ratings (i.e., Ba2 secured and B1 unsecured) should remain unchanged, although with diminished headroom at their respective rating categories. These ratings should not change provided Schaeffler's CFR continues to be strongly positioned at Ba3. At the same time, an event leading to the guarantee falling away would improve the position of the junior lenders, as they would become the sole beneficiaries of the value of the shares in Continental. Through the guarantee from Schaeffler Verwaltungs GmbH, the junior bondholders would benefit from the 46% stake in Continental as underlying credit support that would no longer be shared with senior lenders, even though for the time being only 11.8% had been pledged. Market capitalization of Continental is currently around EUR30 billion, i.e. Schaeffler Verwaltungs GmbH share in Continental has a value of approximately EUR14 billion. The guarantee fall-away event may hence put positive pressure on the B1 rating on the junior bonds. Rating Rationale For CFR Schaeffler's Ba3 corporate family rating is supported by the group's solid business profile evidenced by (i) leading market positions in the bearings and automotive component and systems market with number one to three positions across the wide ranging product portfolio in a relatively consolidated industry; (ii) its leading mechanical engineering technology platform supporting a competitive cost structure and the development of innovative products; (iii) a well diversified customer base, especially in the Industrial division but also to the extent possible in the consolidated automotive industry, and with a sizable aftermarket business accounting for around one quarter of revenues. The rating also benefits from (iv) Schaeffler's proven business model with a good track record of operating performance and margin levels well above the automotive supplier industry average as well as (v) a good innovative power evidenced by a high number of patents, founded on a notable amount of R&D expenses of above 5% of revenues per year. Considering the scale and strong business profile, the Ba3 CFR is predominantly constrained by very high combined indebtedness, with reported senior and junior debt totaling almost EUR10 billion, resulting in a fairly high leverage (Moody's adjusted debt/EBITDA of 4.6x for the last-12-months to June 2014). This is further exacerbated by the fact that absent of any external deleveraging transaction, leverage is unlikely to materially improve just from internally generated cash flows. Another constraint for the CFR is the organizational and legal complexity and evolving structure of Schaeffler in its current state. Schaeffler's CFR is currently strongly positioned. It could be upgraded should Schaeffler be able to (i) generate sustainably positive free cash flows and (ii) improve Moody's adjusted debt/EBITDA to 4.0x (4.6x for the last-12-months to June 2014) either from internally generated cash flows or from proceeds received from assets sales or equity increases. The Ba3 CFR could come under pressure in case of a significant weakening of Schaeffler's operating performance, as indicated by Moody's adjusted EBITA margins below 10% (12.9% for the last-12- months to June 2014), or Moody's adjusted debt/EBITDA above 5.0x, assuming no material deterioration of economic environment. Material negative free cash flow and weakening liquidity, for instance owing to tightening headroom under its financial covenants, could also lead to a downgrade. The principal methodology used in these ratings was Global Automotive Supplier Industry published in May 2013. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. STYROLUTION GROUP: Moody's Assigns '(P)B2' Rating to EUR1BB Loan ---------------------------------------------------------------- Moody's Investors Service has assigned a provisional (P)B2 rating to the proposed EUR1.05 billion equivalent term loan of Styrolution Group GmbH (Styrolution, or the company) and its subsidiary, Styrolution US Holding LLC who is a co-borrower under the facility. Moody's also affirmed the corporate family rating (CFR) of Styrolution at B2, the probability of default rating (PDR) at B2-PD and the instrument ratings on the EUR480 million of senior secured guaranteed notes due 2016 at B2. The outlook on all ratings for is stable. Moody's expects that Styrolution will use the proceeds of the proposed new term loan, along with additional second lien debt and cash on hand to (1) redeem the outstanding secured notes maturing in 2016 (rated B2); (2) on-lend to Ineos Styrolution Holding GmbH to fund its EUR1.1 billion purchase of BASF (SE)'s (A1 stable) 50% stake in Styrolution Holding GmbH, an intermediate parent company of Styrolution; (3) pay fees and expenses. The company has issued a conditional redemption notice for the outstanding notes maturing in 2016. If its refinancing condition is met the notes will be redeemed at a price of 102.859% on or before December 2, 2014. Ineos' acquisition of BASF's equity in the venture is subject to approval by the appropriate antitrust authorities and the company expects it to close in the fourth quarter 2014. Debt proceeds will be held in escrow until Ineos' acquisition is completed, with EUR480 million to be released to repay the existing secured notes in December. Moody's issues provisional ratings in advance of the final sale of securities. Upon closing of the transaction and a conclusive review of the final documentation, Moody's will endeavor to assign definitive ratings. A definitive rating may differ from a provisional rating. Ratings Rationale The affirmation of Styrolution's ratings follows the company's announcement that it has reduced the size of the proposed term loan to EUR1.05 billion equivalent, in combination with expected additional second lien debt, compared to the previous EUR1.6 billion term loan proposal. It has also abandoned the proposal to pay a EUR100 million dividend to Ineos Industries (unrated). The CFR assumes that the company will issue additional second lien debt. If this takes place, the (P)B2 rating of the EUR1.05 billion term loan could be upgraded, consistent with Moody's loss given default methodology. Styrolution's B2 CFR continues to reflect the (1) company's weak Moody's adjusted EBITDA margins and high leverage expected at 7.5% and approximately 4.5x respectively, pro forma the refinancing, with Moody's not expecting leverage to fall until 2015; (2) challenging and competitive trading environment in Europe and in the Asian polystyrene and ABS markets; (3) exposure to feedstock price volatility; (4) lack of product diversification; and (5) heightened substitution threat for its polystyrene and ABS products. However, Styrolution benefits from a (1) leading global market share position in the styrenics market based on capacity, combined with a global operational footprint; (2) cost leadership position with an improved cost position due to cost reductions associated with their restructuring program; (3) diversified end- market exposure across packaging, household, automotive, construction and electronics applications; and (4) certainty of supply of key raw materials, in large part as a result of supply agreements with its shareholder. Moody's assumes a group recovery of 50%, resulting in a PDR of B2-PD, in line with the CFR, as is typical for covenant light structures. The provisional (P)B2 rating on the new EUR1.05 billion equivalent secured term loan, in line with the CFR, reflects that it will be secured by substantially the same security as the existing secured notes and the absence of any unsecured financial debt. It will also be guaranteed by material operating subsidiaries representing approximately 95% of 2013 EBITDA. It will have standard incurrence covenants including those on restricted payments, debt incurrence and liens but no financial covenants. The term loan will also have a cash sweep that is subject to ratchets based on certain reductions in leverage being achieved. Moody's expects positive free cash flow over the next 12 months despite the increased interest burden from up to EUR1.0 billion in additional debt and there are no significant debt maturities, absent drawings on the securitization facility, until the 2021 maturity of the term loan. However, the company is prone to large intra-year working capital swings, which are predominantly a function of feedstock prices and in this regard availability of benzene continues to be tight. Rating Outlook The stable outlook reflects Moody's view that Styrolution will continue to operate at satisfactory margin levels, reduce leverage going forward and maintain an adequate liquidity position. What Could Change The Rating -- UP Positive pressure on the rating could materialise if Styrolution were to (1) sustainably achieve a Moody's-adjusted EBITDA margin of around 7%; (2) generate a sustained positive FCF/debt ratio of around 8%; (3) improve its liquidity profile through increased cash balances; and (4) improve its leverage profile such that its Moody's-adjusted debt/EBITDA ratio is solidly below 4.0x. What Could Change The Rating -- DOWN Conversely, negative pressure on the ratings would emerge if Styrolution's liquidity profile and credit metrics deteriorate as a result of a weakening of its operational performance. Quantitatively, Moody's would also consider downgrading Styrolution if (1) the company's Moody's-adjusted EBITDA margin falls sustainably below 5%; (2) its Moody's-adjusted FCF turns negative over the next 12 months; (3) the company experiences a significant decrease in cash balances; or (4) its debt/EBITDA ratio is above 5.0x for an extended period of time. Principal Methodology The principal methodology used in this rating was Global Chemical Industry Rating Methodology published in December 2013. Other methodologies used include Loss Given Default for Speculative- Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Styrolution Group GmbH, based in Frankfurt, Germany, is a leading global styrenics supplier (based on revenues), especially in Europe and North America. Styrolution is focused on the production and sale of polystyrene, acrylonitrile butadiene styrene (ABS), styrene monomer, and other styrenic specialities. The group is a joint venture between BASF (SE) and Ineos Industries. The joint venture became fully operational as a new independent company on October 1, 2011 and, in June 2014, Ineos signed an agreement to purchase BASF's stake. For financial year- end December 2013, Styrolution's revenues and Moody's-adjusted EBITDA were EUR5.8 billion and EUR404 million respectively. TELE COLUMBUS: Moody's Assigns '(P)B2' CFR; Outlook Stable ---------------------------------------------------------- Moody's Investors Service assigned a first-time (P)B2 corporate family rating (CFR) to Tele Columbus AG. At the same time Moody's assigned a (P)B2 rating to the company's EUR500 million senior credit facilities, consisting of a EUR375 million A facility due 2020, a EUR75 million B/Capex facility due 2019 and a EUR50 million RCF, initially due in 2019 with extension option. The rating outlook is stable. Tele Columbus has announced its intention to file an IPO and list its shares on the Frankfurt stock exchange by the end of 2014, raising at least EUR300 million in primary proceeds. Proceeds will be used to reduce debt and the rated facilities will replace Tele Columbus's existing third-party debt financing. All ratings assigned are provisional pending a conclusive review of final documentation and closing of the IPO and subsequent refinancing transactions as currently envisaged, including a minimum of EUR300 million in primary proceeds. Drawings under the facility will only be possible post or contemporaneously with the IPO. Following closing of the IPO Moody's will endeavor to assign definitive ratings. Moody's notes that a definitive rating may differ from a provisional rating. Ratings Rationale The (P)B2 CFR rating for Tele Columbus reflects: (i) the relatively small scale and scope of the company's operations; (ii) its still significant post-IPO leverage evidenced by a debt/EBITDA ratio (Moody's definition) of around 4.9x on a 2014 expected pro forma basis; (iii) the company's history over the last few years that was characterized by financial stress, restructuring and strategic uncertainty; (iv) the challenge to reignite growth in its "homes connected" base after years of decline; (v) dependence on third-party network provision, in particular for signal provision in the portion of Tele Columbus's network where the company is only a Level 4 provider; (vi) pricing pressure and competition from larger telecoms players (Kabel Deutschland AG, Deutsche Telekom AG) especially for larger housing association contracts and (vii) increased competition in the provision of premium TV programming from both established (Sky Deutschland) and new (OTT providers like Maxdome or Netflix, Inc.) operators. More positively the rating acknowledges (i) the company's significantly increased financial and operational flexibility expected post IPO, (ii) its credible and clearly defined strategy; (iii) Tele Columbus's solid and entrenched market position, especially in its core Eastern Germany territories; (iv) the favorable operating conditions for cable companies in Germany based on the technological advantages of HFC networks in the provision of broadband services; (v) the state-of-the-art quality of the fully-owned and upgraded portion of the company's network; (vi) signs that housing association relations are stabilizing and will provide the basis for successful up- and cross-selling and (vii) good cost control which has allowed for increased EBITDA generation over the last couple of years, notwithstanding lackluster top-line growth. Tele Columbus is the third largest German cable operator (based on the number of subscribers) with strong regional positions in Eastern Germany and a presence in a number of regions in Western Germany. The company's networks are connected to 1.7 million homes, of which just over half are fully upgraded to two-way communication, deploying the Docsis 3.0 standard. Tele Columbus offers basic cable television services (CATV), premium TV services and, where the network is upgraded, Internet and telephony services. As of 30 June 2014, the company had 1.3 million unique subscribers and its ratio of revenue generating units (RGUs) to unique subscribers stood at 1.4 times. Approximately 97% of Tele Columbus's contracts are entered into as part of concession agreements for multi dwelling units (MDUs). Historically, Tele Columbus was mainly an operator of Level 4 (L4) cable systems, i.e. providing the in-house wiring, which transports signals delivered by Level 3 (L3) operators such as Kabel Deutschland (now owned by Baa1, Stable rated Vodafone Group plc) from a transfer point outside the customer's dwelling unit to the wall outlet inside. However, over the last few years, Tele Columbus has undertaken steps to create an integrated L3/L4 network, which allows for significant savings in signal fees and the provision of broadband services in the upgraded sections of the network. Moody's expects Tele Columbus's liquidity provision to be adequate for its near term operational needs. Liquidity provision will rely substantially on the EUR50 million revolving credit facility and continued access to the B facility (capex facility) as well as cash on balance sheet of EUR25 million (pro forma for the IPO and closing of the refinancing transaction). The RCF is expected to be undrawn at closing, but might be utilized from time to time for working capital and general purposes. While there are some extraordinary working capital outflows expected for 2014, going forward working capital flows should be fairly neutral on a year-on-year basis. Tele Columbus has no scheduled repayments under the facilities before their final maturity date. The facilities will be subject to maintenance covenants, which stipulate a ratio of net Debt/EBITDA (as defined by the facilities agreement) of 5.5x prior to December 2015, stepping down to 5x prior to December 2016 and to 4.5x thereafter while an interest cover ratio of 4x must be maintained at all times. Tele Columbus's capital structure will consist of the rated credit facilities and common equity. The credit facilities will receive upstream guarantees from group companies representing at least 80% of Tele Columbus's EBITDA. Security for the rated debt is limited to share pledges. The rated credit facilities (facility A, facility B (capex) and RCF) rank pari passu amongst each other. For the purposes of Moody's Loss-Given-Default methodology Moody's has -- in the absence of asset security -- ranked the credit facilities first together with Tele Columbus's trade payables, lease rejections claims and pension obligations. Moody's has also used a 65% recovery rate, which is typically applied for all bank loan structures. Consequently the credit facilities have been assigned a (P)B2 rating, which is at the level of Tele Columbus's CFR. The stable rating outlook reflects the solid positioning in the B2 category and Moody's expectation that Tele Columbus can execute on its stated strategy and manage its growth capex so that leverage does not deteriorate materially from its 2014 pro forma -- expected starting level (Moody's defined debt/EBITDA of around 4.9x). Evidence of continued operating progress including a return to growth in the "homes connected" base together with a debt/EBITDA ratio moving to and then being maintained below 4.5 x could result in upgrade pressure. Downward pressure for the rating could ensue, if strategy execution fails e.g. RGU per subscriber and ARPU growth stall and/or the deterioration in the "homes connected" base continues, leading to a more than temporary deterioration in the debt/EBITDA leverage ratio to above 5.5x. The principal methodology used in this rating was Global Pay Television - Cable and Direct-to-Home Satellite Operators published in April 2013. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Tele Columbus AG is a holding company, which through its subsidiaries offers basic cable television services (CATV), premium TV services and, where the network is upgraded, Internet and telephony services in Germany where it is the third largest cable operator. The company is based in Berlin, Germany and reported revenue of Euro 208 million for the 2013 financial year. TELE COLUMBUS: S&P Assigns 'B+' Prelim. Corp. Credit Rating ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' long-term preliminary corporate credit rating to German cable operator Tele Columbus. The rating will remain preliminary until the planned IPO and EUR300 million equity injection are executed and the EUR375 million term loan, EUR75 million capital expenditure facility, and EUR50 million revolving credit facility (RCF) are put in place, replacing all current outstanding debt. The corporate credit rating is constrained by Tele Columbus' still significant reliance on third-party cable TV networks and a partial upgrade to the highest industry standards. The company's limited scale and diversity also constrain the rating, as do huge investment outlays and significant execution risks as the company seeks to accelerate its transition away from basic cable TV offerings toward the model of its successful European and German peers. If it manages to do so, the transition should help support customer retention, increase bundle penetration, and lift its average revenues per user (ARPU) through upselling activity. The sheer level of investments that are involved in the various projects related to this transformation, spanning technical upgrades, own network extension, and commercial initiatives, generate a risk, including a timing uncertainty, which could materially affect overall performances in a very competitive environment. S&P said: "In our view, there is a risk that, at renewal dates, its housing association direct customers would churn to larger and on average more advanced cable providers Kabel Deutschland or Unitymedia, or to Deutsche Telekom's asymmetric digital subscriber line (ADSL) offerings, if Tele Columbus cannot then offer upgraded and converged services. "However, the long-term nature of its housing-association contracts provides the company some visibility and leeway to deploy its investment plan. We also acknowledge that the company has been able to significantly raise its broadband market share against incumbent Deutsche Telekom in the recent past and that it boasts leading local cable market shares in Eastern Germany, testifying for the company's successful commercial achievements within its own and upgraded footprint, and also reflecting the technical edge of an upgraded cable offer over inferior ADSL technology. "The stable outlook assumes the company will maintain its high operating efficiency in the next year, successfully renegotiate maturing housing association contracts, and continue to deliver on its operational targets, which should be illustrated by positive revenue growth and improving EBITDA margins. In addition, we anticipate FOCF will improve from negative territory in 2015 to about breakeven in 2016, adjusted debt to EBITDA to remain below 4x, and liquidity to remain adequate." =========== G R E E C E =========== GREECE: Wants to Retain Access to Bailout Funds Next Year --------------------------------------------------------- Nikos Chrysoloras and Marcus Bensasson at Bloomberg News report that Greece's creditors insist the country should retain access to bailout funds next year even as the government seeks an almost-balanced budget for the first time in decades. The country's budget deficit will shrink to EUR338 million (US$424 million) next year, or 0.2% of gross domestic product, from EUR1.41 billion, or 0.8% of GDP, this year, Bloomberg says, citing the 2015 draft budget, which was submitted to parliament on Oct. 6. According to Bloomberg, the plan shows that the primary surplus, which is the budget before interest payments, will rise to EUR5.42 billion in 2015, or 2.9% of GDP, from EUR3.6 billion this year. According to Bloomberg, two officials with knowledge of the matter said that Greece's improving public finances haven't convinced its euro-area partners to accept Prime Minister Antonis Samaras's plan for a clean bailout exit at the end of 2014. The Mediterranean nation returned to bond markets in April, when it sold debt for the first time in four years, and Samaras has repeatedly said that Greece will be able to cover its financing needs in the markets after the euro-area program expires in December, Bloomberg recounts. Mr. Samaras has said that the country would potentially forgo some remaining tranches from the International Monetary Fund if necessary, Bloomberg notes. The people, as cited by Bloomberg, said Greece's creditors would prefer to keep some form of credible backstop in case market conditions worsen. One of the people said the prevailing view among officials from the European Commission, the European Central Bank and the IMF, who monitor Greece's compliance with the terms of its bailout, is that the country's market access remains fragile, Bloomberg relays. The bailout loans, which have kept Greece afloat since 2010, came with strict conditions of belt tightening that triggered a social backlash and exacerbated a recession that left more than a quarter of the workforce without a job, Bloomberg discloses. Access to bailout funds next year would also come with strings attached, Bloomberg states. ============= I R E L A N D ============= * IRELAND: Number "Zombie" Companies Rises to 154,000, R3 Says -------------------------------------------------------------- InsolvencyJournal.ie, citing research by insolvency trade body R3, who are the trade body for Insolvency Professionals in the UK, the number of businesses just paying the interest on their debts -- a key characteristic of "zombie businesses" -- has jumped from 103,000 in November 2013 to 154,000. The figure is the highest number of businesses in this position in eighteen months, InsolvencyJournal.ie notes. Zombie companies are described as those which can only service the interest they owe, but not the debt itself, according to InsolvencyJournal.ie. But rather than a return of the "zombie business" phenomenon, insolvency practitioners suspect that late payment and over-trading problems associated with economic recovery are behind the rise, InsolvencyJournal.ie notes. "Zombie businesses" emerged after the 2009 recession when thousands of businesses that might have been expected to fail were kept afloat by a combination of low interest rates, lenient creditors, and a sluggish recovery, InsolvencyJournal.ie recounts. This issue was raised by Tom Kavanagh, Partner at Deloitte Restructuring Services, at the Corporate Restructuring Summit where he highlighted concerns that many Irish SME's who may have struggled through the recession will now become progressively weaker as the economy begins to pick up, InsolvencyJournal.ie relates. The business most at risk are those that don't get paid quickly enough and those with lack of access to new finance, InsolvencyJournal.ie states. Giles Frampton, president of R3, as cited by InsolvencyJournal.ie, said: "Making the minimum payments on debts or renegotiating payment terms with creditors can free up some extra cash and buy some time, but it's not a long-term solution. Healthy cash flow is critical" he added: "An improving economy will have pulled businesses back from the very edge, but thousands of businesses are still in a potentially difficult situation." "Just paying the interest on debts or constantly renegotiating with creditors could leave businesses in limbo: they will be in business but with little chance of growth, like the archetypal 'zombie' company." =========== R U S S I A =========== TEMIRBANK JSC: S&P Lowers ST Counterparty Credit Rating to 'C' -------------------------------------------------------------- Standard & Poor's Ratings Services said it had lowered its short- term counterparty credit rating on Kazakhstan-based Temirbank JSC to 'C' from 'B'. S&P affirmed its 'B-' long-term counterparty credit rating. The outlook is stable. At the same time, S&P affirmed its 'kzBB' Kazakhstan national scale rating on the bank. "Also, we lowered our issue rating on Temirbank's nondeferrable subordinated debt to 'CCC' from 'CCC+'," S&P said. "We lowered the short-term rating to reflect the imminent risks (operational and transitional risks) related to Temirbank's pending merger with ForteBank and Alliance Bank. The affirmation of the long-term rating reflects S&P's view of several key developments in the first half of 2014 and stable characteristics of bank's financial profile: In May 2014, government fund Samruk-Kazyna sold its shares in Temirbank to Bulat Utemuratov, a local businessman who also owns 80.9% of ForteBank and 16% of currently in default Alliance Bank. As announced in August 2014, Alliance Bank's shareholders have agreed on a nonbinding term sheet with the steering committee of its creditors regarding the restructuring of approximately $1.2 billion of the bank's debt. This move will help ensure the bank's recapitalization and pave the way for its pending consolidation with Temirbank and ForteBank. "We think that the legal consolidation of the three banks is likely by the end of 2014. The restructuring process at Alliance is subject to final approval by the steering committee of creditors, and we have limited information on the financial terms of the consolidation. Temirbank, which may cease to exist as a legal entity upon merging, improved its financial profile in the first half of 2014, with a profit of about Kazakhstani tenge (KZT) 10 billion (Us$55 million) -- compared with losses in 2013 -- a stable risk-adjusted capital of roughly 7%, and adequate liquidity," said S&P. "Our base case accounts for Temirbank's positive stand-alone developments as well as the potential pitfalls surrounding the conditions of the merger with ForteBank and Alliance Bank. Following our assessment of these uncertainties, we think that our 'B-' long-term rating on the bank adequately reflects the possible long-term risks and our 'C' short-term rating reflects the more imminent ones (operational and transitional risks related to merger)," said S&P. S&P said: "Our stable outlook on Temirbank balances our expectations that the bank will likely maintain its stand-alone credit profile at the current level, notably with a profit in 2014 and still adequate funding and capital metrics, according to our base-case expectations, against the risks related to the likely merger with Alliance Bank and ForteBank. "Because the bank's proposed merger has yet to receive final approval and there are very few details are available, we think that the impact of the transaction, if completed, on Temirbank's creditworthiness remains uncertain. We will monitor any possible impact over the next few months. "In our view, there is very limited likelihood of an upgrade in the next 12 months given the execution risks of the merger. Conversely, we could take a negative rating action if the bank experienced pronounced liquidity deterioration, for example due to deposit withdrawals, or if material operational and financial risks emerge from the transaction with ForteBank and Alliance Bank and weaken Temirbank's financial profile. In addition, a sharp increase in credit costs that affect the bank's financial results, causing the risk-adjusted capital ratio to drop below 5%, could led us to lower the long-term rating," said S&P. ========= S P A I N ========= BBVA RMBS 11: Moody's Raises Rating on EUR77MM C Notes to 'Ba3' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of 7 notes in 4 Spanish RMBS: BBVA RMBS 5, FTA; BBVA RMBS 9, FTA; BBVA RMBS 10, FTA and BBVA RMBS 11, FTA. The rating action concludes the review of the notes placed on review on March 17, 2014, following the upgrade of the Spanish sovereign rating to Baa2 from Baa3 and the resulting increase of the local-currency country ceiling to A1 from A3. The sovereign rating upgrade reflected improvements in institutional strength and reduced susceptibility to event risk associated with lower government liquidity and banking sector risks. Ratings Rationale The rating action reflects (1) the increase in the Spanish local- currency country ceiling to A1 and (2) sufficiency of credit enhancement in the affected transactions. The rating action also reflects the correction of a model input error. In prior rating actions, the recovery rate input in the model was inconsistent with the MILAN input, therefore the tail of the asset loss distribution was generated incorrectly. The model has now been adjusted, and the rating action reflects this change. -- Reduced Sovereign Risk The Spanish sovereign rating was upgraded to Baa2 in February 2014, which resulted in an increase in the local-currency country ceiling to A1. The Spanish country ceiling, and therefore the maximum rating that Moody's will assign to a domestic Spanish issuer including structured finance transactions backed by Spanish receivables, is A1 (sf). The increase of credit enhancement combined with stable performance and the reduction in sovereign risk has prompted the upgrade of the notes. -- Key collateral assumptions The key collateral assumptions have not been updated as part of this review. The performance of the underlying asset portfolios remain in line with Moody's assumptions. Moody's also has a stable outlook for Spanish ABS and RMBS transactions. Sensitivity of the ratings to increases in key collateral assumptions has been incorporated into the quantitative analysis. The increases included stresses of 1.3x Expected Loss and 1.2x Milan. Sensitivity analysis would typically expect to see the ratings reduce by no more than two to three notches using these stressed assumptions. -- Exposure to Counterparties Moody's rating analysis also took into consideration the exposure to Banco Bilbao Vizcaya Argentaria, S.A. (Baa2/P-2) acting as servicer and issuer account bank in the four transactions. Principal Methodology The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in March 2014. Factors that would lead to an upgrade or downgrade of the ratings: Factors or circumstances that could lead to an upgrade of the ratings include (1) further reduction in sovereign risk, (2) performance of the underlying collateral that is better than Moody's expected, (3) deleveraging of the capital structure and (4) improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expects, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. List of Affected Ratings Issuer: BBVA RMBS 5, FTA EUR4675M A Notes, Upgraded to A2 (sf); previously on Mar 17, 2014 Baa2 (sf) Placed Under Review for Possible Upgrade Issuer: BBVA RMBS 9, FTA EUR1295M A Notes, Upgraded to A1 (sf); previously on Mar 17, 2014 A3 (sf) Placed Under Review for Possible Upgrade Issuer: BBVA RMBS 10, FTA EUR1376M A Notes, Upgraded to A1 (sf); previously on Mar 17, 2014 A3 (sf) Placed Under Review for Possible Upgrade EUR224M B Notes, Upgraded to Baa3 (sf); previously on Mar 17, 2014 B1 (sf) Placed Under Review for Possible Upgrade Issuer: BBVA RMBS 11, FTA EUR1204M A Notes, Upgraded to A1 (sf); previously on Mar 17, 2014 Baa1 (sf) Placed Under Review for Possible Upgrade EUR119M B Notes, Upgraded to Ba1 (sf); previously on Mar 17, 2014 Ba2 (sf) Placed Under Review for Possible Upgrade EUR77M C Notes, Upgraded to Ba3 (sf); previously on Mar 17, 2014 B3 (sf) Placed Under Review for Possible Upgrade CAIXA PENEDES PYMES 1: Fitch Cuts Rating on Cl. C Notes to 'CCC' ---------------------------------------------------------------- Fitch Ratings has downgraded two tranches of Caixa Penedes PYMES 1 TDA, FTA and affirmed Caixa Penedes FTGENCAT 1 TDA, FTA, as follows: Caixa Penedes PYMES 1 TDA, FTA Class A notes (ISIN ES0357326000): affirmed at 'AAsf', Outlook revised to Negative from Stable Class B notes (ISIN ES0357326018): downgraded to 'BBsf' from 'BBBsf'; removed from RWN; Outlook Negative Class C notes (ISIN ES0357326026): downgraded to 'CCCsf' from 'B- sf'; RE25%; removed from RWN Caixa Penedes FTGENCAT 1 TDA, FTA Class A1 (ISIN ES0318559004): affirmed at 'AA+sf', Outlook Stable Class A2 (CA) (ISIN ES0318559012): affirmed at 'AA+sf', Outlook Stable Class B (ISIN ES0318559020): affirmed at 'AAsf', Outlook revised to Stable from Negative Class C (ISIN ES0318559038): affirmed at 'BB+sf'; removed from RWN; Outlook Negative The transactions are granular cash flow securitization of a pool of secured and unsecured loans granted to Spanish small- and medium-sized enterprises by Caixa Penedes (now part of Banco Mare Nostrum) and are now serviced by Banco de Sabadell. All ratings are capped at 'AA+sf', which is the rating cap for Spanish structured finance transactions. Key Rating Drivers Uncertain Recovery Proceeds Timing The servicing agreement was transferred to Banco de Sabadell in May 2013 from Caixa Penedes. After the closing of the agreement there was a transition period for the business integration. Banco de Sabadell has informed Fitch that the securitized loans have been managed with the same standard of care and effort as any other loans. Since the last review, recovery proceeds have only slightly improved and Fitch is thus revising the recovery lag assumption to 10 years from five years for both transactions. Downgrade of Caixa Penedes PYMES 1 The downgrades of Caixa Penedes PYMES 1's class B and C notes reflect the vulnerability of the notes to uncertain recovery proceeds. The transaction has reported EUR210,000 of recoveries over the past year. In addition, the transaction's performance has deteriorated since the notes were placed on RWN, with an additional EUR3.8 million of defaults reported between February and August 2014. Cumulative defaults since closing were EUR45.4 million as of the August 2014 report, which represents 5.7% of the initial portfolio balance, close to the interest deferral trigger of 7% from the class C notes. Fitch considers that interest deferral on the class C notes is likely to occur in the next year if the trend in defaults continues. Interest deferral on the class B notes is also possible as the trigger is 9% of cumulative defaults over the initial balance. The affirmation of the class A notes reflects that they benefit from substantial credit enhancement. However, the Outlook on the class A notes has been revised to Negative from Stable. The reserve fund (RF) stood at EUR6.2 million as of August 2014 but Fitch expects further drawings if current delinquent loans roll into default and recoveries remain very low. Loans that are more than 90 days in arrears currently stand at EUR8.5 million. In case of a depletion of the RF, the class A notes would be exposed to payment interruption risk upon the servicer's default. Affirmation of Caixa Penedes FTGENCAT 1 The affirmation of the class A1 and A2 (CA) and B notes reflects the increase in credit enhancement due to deleveraging. Since the last review in April 2014, the class A notes have paid down by EUR23.3 million, mainly due to high recent prepayments in the portfolio, and the available credit protection increased to above 100% offsetting the deterioration in the portfolio. The credit enhancement for the class B and C notes has also increased, albeit to a lesser extent. The affirmation of the class B notes and revision of the Outlook to Stable reflects the substantial increase in credit enhancement of 6%. The notes are less vulnerable to uncertain recovery proceeds. The class C notes have been affirmed and removed from RWN. While Fitch's assumption on the recovery lag has been extended to 10 years, the increase in credit enhancement has offset the additional negative carry assumed on the notes. The Negative Outlook reflects the rating dependence on the ultimate sale and value of the mortgaged collateral. Payment Interruption Risk The available RFs of both transactions remains sufficiently funded to provide liquidity support to the structures in the event of payment interruption as a result of a servicer default, and can cover the senior notes' interest at a stressed index rate. Rating Sensitivities The agency has incorporated a recovery stress test in its analysis to determine the ratings' sensitivity to the lower recovery prospects assuming no recoveries from unsecured loans. The impact on the junior notes is one notch in both transactions. LA SEDA DE BARCELONA: Packaging Unit Attracts Three Bids -------------------------------------------------------- According to Bloomberg News' Jim Silver, La Seda de Barcelona said in a Spanish regulatory filing that bids for its packaging unit were opened Sept. 29. The company said that three bidders were selected for the second round, in which they can improve their offers, Bloomberg relates. La Seda de Barcelona is a Spanish plastics bottle maker. The Catalonia-based company makes bottles in Europe, Turkey and North Africa. In June 2013, La Seda de Barcelona placed itself in voluntary insolvency after failing to reach agreement with creditors to restructure its debt. In February 2014, La Seda de Barcelona entered the liquidation phase following a ruling by a commercial court judge in Barcelona, Spain. In July 2014, a Barcelona judge approved a rescue plan drawn up by the La Seda's court-appointed administrator. ============= U K R A I N E ============= CAPE VIEWER: Noble Chartering Selected as Sole Bidder ----------------------------------------------------- Reynolds Hutchins at Inside Business reports that Ukrainian cargo ship Cape Viewer was auctioned on Oct. 6 on the steps of the federal courthouse in downtown Norfolk. According to Inside Business, the winner and sole bidder was Noble Chartering Inc., which bid US$8.3 million for the ship. The price is US$3 million lower than the vessel's estimated worth on VesselsValue.com and US$800,000 less than the reported price Mr. Baranskiy paid back in 2012, Inside Business notes. Noble, a subsidiary of Hong Kong-based supply chain management company Noble Group Ltd., was one of three companies that in May filed claims against the Cape Viewer's original owner, Viktor Baranskiy, Inside Business recounts. According to U.S. federal court documents, in 2008 Mr. Baranskiy attempted to file for bankruptcy in the early months of the global economic collapse, Inside Business discloses. Although it is a matter of some dispute, in 2008, it is believed Mr. Baranskiy was a chief executive, or at least working behind the scenes of a Ukrainian shipping line known as Industrial Carriers Inc., or ICI, Inside Business notes. At the time, ICI had entered into multiple futures contracts with Swiss coal trader Flame S.A. and Singapore operator Glory Wealth Shipping, Inside Business relays. The two companies would be out a combined US$67.4 million if ICI went bankrupt, so the pair began pursuing legal recourse, first in London and later New York, Inside Business discloses. But, they had little luck. "The two plaintiffs believed they were owed the money," Inside Business quotes Norfolk maritime attorney Len Fleisig, who represented Noble in the Oct. 6 auction, as saying. "But they couldn't go to the Ukraine to collect." Instead, Mr. Fleisig said, the companies began to track down Mr. Baranskiy's assets, Inside Business relays. The search led them to Norfolk. In November 2013, the Cape Viewer arrived in Hampton Roads and was loaded with more than 104,606 tons of coal at the Norfolk Southern terminal, Inside Business recounts. The ship had been chartered by Noble Chartering Inc. to deliver the cargo to Rotterdam, Mr. Fleisig, as cited by Inside Business, said, "just in time for the winter heating season in north Europe." But before the ship could aweigh anchor, attorneys representing Flame appeared in federal court in Norfolk to ask the court to issue an order of attachment, Inside Business relays. The ship was seized, Inside Business recounts. Mr. Baranskiy didn't back down though and for months fought to free the ship in U.S. federal court, Inside Business relates. But the claims mounted against him and even Noble threw its hat into the ring, Inside Business notes. On Sept. 4, in the middle of a cross-examination, Mr. Baranskiy and his attorney Sergei Kachura fled, Inside Business relays. Without a defendant and with millions owed to Flame and Glory Wealth, the Norfolk federal court ordered the Cape Viewer be sold to repay Mr. Baranskiy's debts, Inside Business discloses. =========================== U N I T E D K I N G D O M =========================== ARROW GLOBAL: S&P Alters Ratings Outlook to Neg on Capquest Deal ---------------------------------------------------------------- Standard & Poor's Ratings Services said it had revised its outlook on U.K.-based purchaser of distressed consumer debt, Arrow Global Group PLC, to negative from stable. The 'B+' counterparty credit rating was affirmed. The outlook revision follows Arrow Global's announcement on Sept. 24, 2014, that it intends to acquire Capquest, also a purchaser of distressed debt, for GBP158 million. "In our view, the acquisition will reduce the group's headroom in terms of leverage metrics in the event of a material underperformance of future collections. The outlook revision also reflects our view of management's willingness to take on additional debt and weaken Arrow Global's financial profile as a result of the fully debt- financed acquisition. However, we note that, despite having a somewhat shorter track record than its peers, Arrow Global has demonstrated good operating performance and was able to reduce leverage following its first GBP220 million bond issuance in January 2013," said S&P. S&P said: "We understand that the acquisition is subject to Arrow Global's shareholders' approval. Following the acquisition, Capquest will become part of Arrow Global's "restricted group," as defined in the documentation for the senior secured term notes. Arrow Global expects to raise oe225 million in additional debt, of which GBP158 million will finance the acquisition. It will use the remainder to repay the existing drawings on its revolving credit facility (RCF) and add cash to the balance sheet. In the meantime, Arrow Global has secured bridge financing from Goldman Sachs. The combination of Arrow Global and Capquest will create a larger player in the U.K.'s debt purchase and management industry in terms of the estimated remaining collections (ERC), number of customer accounts, and debt-purchase capacity. In terms of ERC, the combined entity will rank second to Cabot and ahead of Lowell. S&P expects the debt-financed acquisition to weaken Arrow Global's debt-servicing and leverage credit metrics to levels that remain commensurate with the 'B+' rating. However, in its base-case scenario for Arrow Global, S&P assumes continued and significant growth in total collections, which leaves limited headroom should future collections materially underperform its base-case forecast. For the combined business after the acquisition, S&P forecasts: Deterioration of the ratio of gross debt to Standard & Poor's- adjusted EBITDA plus portfolio amortization (a noncash item) to about 3.5x in 2015, followed by improvement to about 3x in 2016; and Weakening of the adjusted EBITDA coverage of gross cash interest expense to below 4.5x in 2015, before improving toward 5x in 2016. In S&P's view, these ratios are indicative of a stronger financial profile than Cabot's over 2015-2016, but weaker than that of Lowell. At this stage, S&P does not assume any material potential benefit of the acquisition for Arrow Global's business profile. The long-term rating on Arrow Global reflects the group credit profile (GCP) of the combined restricted group created by the acquisition. S&P assesses the GCP at 'b+'. The rating on Arrow Global, which is an intermediate nonoperating holding company, also reflects S&P's view that there appear to be no material barriers to cash flows to the holding company from the subsidiaries in the restricted group. S&P's recovery rating of '2' on Arrow Global's existing GBP220 million notes reflects its expectation of substantial recovery (70%-90%) for noteholders in the event of a default, after repayment of the RCF. S&P don't expect the issuance of additional debt to materially affect the recovery prospects. The negative outlook indicates the possibility of a downgrade if, after the acquisition, growth in total collections is insufficient to reduce Arrow Global's leverage over the following 12 to 18 months. S&P assumes that the transaction will receive shareholder approval, and the outlook therefore reflects its view that Arrow Global's acquisition of Capquest will reduce the group's headroom under its leverage metrics in the event of a material underperformance of future collections. However, S&P's base-case scenario is predicated on continued growth in total collections, leading to improvements in cash flow coverage and leverage metrics in 2015, after a weakening of credit metrics on completion of the transaction. S&P could lower the ratings if it no longer expects that Arrow Global will steadily improve its leverage metrics in 2015, with adjusted EBITDA interest coverage failing to recover to about 4.5x. S&P could also lower the ratings if it sees evidence of a failure in Arrow Global's control framework, meaningful unanticipated costs related to the proposed transaction, adverse changes in the regulatory environment, or materially lower collections than the company expects. S&P could revise the outlook to stable if it saw evidence of successful integration of Capquest that would enable the group to start deleveraging, with the adjusted EBITDA interest coverage ratio increasing toward 4.5x by year-end 2015 and likely to stay above this level on a sustainable basis. CO-OPERATIVE GROUP: FCA Approves Governance Structure Overhaul -------------------------------------------------------------- Lauren Davidson and John Ficenec at The Telegraph report that the Financial Conduct Authority on Oct. 1 approved a major overhaul of Co-operative Group's governance structure and the Co-op Bank launching a hard-hitting new advertising campaign. The reforms, which were approved by an overwhelming majority of the society's members at a special general meeting in August, include a total clear out of the Co-op Group's board and a reduction in the number of its directors from 18 to 11, The Telegraph discloses. Three of these will be nominated by members, with the remainder being independent, The Telegraph notes. The approval of these reforms coincides with a push by the Co-op Bank, which is about 20% owned by the Group, to restore trust in its brand, with an advertising campaign highlighting the bank's customer-led ethical policy, The Telegraph states. The TV spot -- which was directed by Tony Kaye, the director of American History X, with a score composed by Les Miserables musician Anne Dudley -- was set to air for the first time on Oct. 1, during Coronation Street on ITV and the Champions League game on Sky Sports 1. It shows a man having the words "Ethics & Values" tattooed on his back, inspired to ink by the bank's ethical policy, The Telegraph discloses. "I belong to an organization that does things a little differently," he says, over a backdrop of images of skulls and bullets, The bank, which has turned away more than GBP1 billion of business that did not fit in with its ethical policy, said it wants to attract customers to its services "for all the right reasons", The Telegraph relays. The bank aims to avoid investing in companies involved in animal testing, the arms trade or sweatshop labor, among other areas that it considers unethical according to its standards, The Telegraph says. According to The Telegraph, Niall Booker, chief executive of the Co-operative Bank, said the ad campaign is "the start of reinvesting in the brand and what makes us different." "We understand that the difficulties the bank has faced in the last year are bound to test customers' beliefs, but now the bank is stronger we want to reassure them that we have not forgotten the values and ethics that set us apart and remain a key part of our success in the future," The Telegraph quotes Mr. Booker as saying. 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. * UK: New Employment Law Ruling May Spur Scottish Bankruptcies -------------------------------------------------------------- Lianna Brinded at International Business Times reports that the Confederation of British Industry Scotland has warned that the European Court of Justice's new employment law ruling, which allows workers to receive regular overtime, commission and bonus payments during paid leave, could bankrupt businesses across the country. According to IBT, the business lobby group said the law, which up until now only meant employers had to stump up basic pay as part of holiday entitlement, will cause firms to fold as companies won't be able to survive under the extra billions of pounds in costs. "In Scotland and across the UK we could see job losses, we could see major infrastructure projects come to a stop, we could see the loss of overtime and really it stops confidence in Scotland and in the UK," IBT quotes Andrew Palmer of CBI Scotland as saying. "We've got to keep on this inward investment and looking for investment to come here." =============== X X X X X X X X =============== * S&P Takes Various Rating Actions on EU Synthetic CDO Deals ------------------------------------------------------------ After running its month-end SROC (synthetic rated overcollateralization) figures, Standard & Poor's Ratings Services on Oct. 6, 2014, took various credit rating actions on 11 European synthetic collateralized debt obligation (CDO) tranches. Specifically, S&P has: -- Raised its rating on one tranche; -- Raised and removed from CreditWatch positive its ratings on four tranches; -- Placed on CreditWatch positive its ratings on four tranches; -- Lowered its rating to 'D (sf)' on one tranche; and -- Affirmed its rating on one tranche. The issuers rated are: Ashwell Rated S.A. Astir B.V. C.L.E.A.R. PLC Omega Capital Investments PLC Sceptre Capital B.V. Xelo Plc Selecta CDO Ltd. A table showing the specific ratings is available at the S&P site at http://is.gd/xxzVli The rating actions are part of S&P's regular monthly review of European synthetic CDOs. The actions incorporate, among other things, the effect of recent rating migration within reference portfolios and recent credit events on corporate entities. WHERE S&P HAS PLACED ITS RATINGS ON CREDITWATCH NEGATIVE The SROC (synthetic rated overcollateralization; see "What Is SROC?" below) has fallen below 100% during the August 2014 month- end run. This indicates to us that the current credit enhancement may not be sufficient to maintain the current tranche rating. WHERE S&P HAS REMOVED ITS RATINGS FROM CREDITWATCH NEGATIVE The SROC has risen above 100% during the August 2014 month-end run. This indicates to S&P that the current credit enhancement is sufficient to maintain the current tranche rating. WHERE S&P HAS PLACED ITS RATINGS ON CREDITWATCH POSITIVE The tranche's current SROC exceeds 100%, which indicates to S&P that the tranche's credit enhancement is greater than that required to maintain the current rating. Additionally, S&P's analysis indicates that the current SROC would be greater than 100% at a higher rating level than currently assigned. WHERE S&P HAS LOWERED ITS RATINGS S&P has run SROC for the current portfolio and have projected SROC 90 days into the future, while assuming no asset rating migration. S&P has lowered its ratings to the level at which SROC is above or equal to 100%. However, if the SROC is below 100% at a certain rating level but greater than 100% in the projected 90-day run, S&P may leave the rating on CreditWatch negative at the revised rating level. WHERE S&P HAS RAISED ITS RATINGS S&P has raised its ratings to the level at which SROC exceeds 100% and meets its minimum cushion requirement. For further details of its upgrade guidelines, see "Revised Methodologies And Assumptions For Global Synthetic CDO Surveillance," published on Sept. 30, 2010. WHERE S&P HAS AFFIRMED ITS RATINGS S&P has affirmed our ratings on those tranches for which credit enhancement is, in its opinion, still at a level commensurate with its current ratings. WHERE S&P HAVE LOWERED ITS RATINGS TO 'CC' S&P has lowered its ratings to 'CC' where losses in a portfolio have already exceeded the available credit enhancement or where, in its opinion, it is highly likely that this will occur once S&P knows final valuations. S&P has done so as it considers that it is highly likely that the noteholders will not receive their full principal. WHERE S&P HAS LOWERED ITS RATINGS TO 'D' S&P has lowered its ratings to 'D' where it has received confirmation that losses from credit events in the underlying portfolio have exceeded the available credit enhancement and partially reduced the notes principal amount. This means the noteholders did not receive interest based on the full notional of the notes. The rating lowered to 'D (sf)' will remain at 'D (sf)' for a period of 30 days before the withdrawal becomes effective. ANALYSIS For all of S&P's European synthetic CDO transactions, S&P applies its corporate CDO criteria (see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published on Aug. 1, 2014. Therefore, S&P has run its analysis on CDO Evaluator model 6.0.1, which includes the top obligor and industry test SROCs. In addition to the obligor and industry tests, and the Monte Carlo default simulation results, S&P ma consider certain factors such as credit stability and rating sensitivity to modeling parameters when assigning ratings to CDO tranches. S&P assesses these factors case-by-case and may adjust the ratings to a rating level that is different to that indicated by the quantitative results alone. WHAT IS SROC? One of the main steps in S&P's rating analysis is the review of the credit quality of the portfolio referenced assets. SROC is one of the tools S&P uses when surveilling its ratings on synthetic CDO tranches with reference portfolios. SROC is a measure of the degree by which the credit enhancement (or attachment point) of a tranche exceeds the stressed loss rate assumed for a given rating scenario. SROC helps capture what we consider to be the major influences on portfolio performance: Credit events, asset rating migration, asset amortization, and time to maturity. It is a comparable measure across different tranches of the same rating. ********* 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. 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 * * *