/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/141219.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, December 19, 2014, Vol. 15, No. 251 Headlines B E L G I U M ETHIAS SA: Fitch Affirms 'BB+' Subordinated Debt Rating B U L G A R I A PLOVDIV CITY: S&P Cuts Issuer Credit Rating to 'BB+' SOFIA CITY: S&P Lowers Issuer Credit Rating to 'BB+' STARA ZAGORA: S&P Revises Outlook to Stable & Affirms 'BB+' ICR UNICREDIT BULBANK: S&P Cuts Counterparty Credit Ratings to 'BB+' I C E L A N D KAUPTHING BANK: Iceland Mulls Unfreezing Assets I R E L A N D AVOCA CLO VI: Fitch Affirms 'Bsf' Rating on Class E Notes CVC CORDATUS IV: Fitch Assigns 'B-sf' Rating to Class F Notes I T A L Y WASTE ITALIA: Fitch Assigns 'B-' Rating to 5-Yr. Secured Notes K A Z A K H S T A N TEMIRBANK JSC: S&P Raises Counterparty Credit Ratings to 'B/B' N E T H E R L A N D S HALCYON LOAN: S&P Assigns 'B- (sf)' Rating to Class F Notes STICHTING HOLLAND: Fitch Affirms 'BBsf' Rating on Class D Notes UNITED GROUP: S&P Affirms 'B' CCR; Outlook Stable R O M A N I A MEDIAFAX GROUP: Enters Insolvency; KPMG Named Administrator R U S S I A BANK TAVRICHESKY: S&P Puts 'B-' CCR on CreditWatch Negative MECHEL OAO: Net Loss Widens to US$575-Mil. in Third Quarter 2014 TRANSTELECOM COMPANY: Fitch Corrects Dec. 15 Rating Release U K R A I N E MRIYA AGRO: CFO Resigns Amid US$1-Bil. Debt Restructuring U N I T E D K I N G D O M CO-OPERATIVE BANK: Fails Bank of England Stress Test EUROSAIL-UK 2007-4BL: Fitch Lifts Rating on Class D1a Notes to CC JJB SPORTS: Ex-Chief Sentenced to Four Years in Prison MORSTON ASSETS: Fails to Secure Funding, Administrators Appointed NANDAN CLEANTEC: Shares Suspended as it Goes Into Administration RANGERS FOOTBALL: Manager Offers Resignation TALL TREES GARDEN: Center Site to be Sold by ES Group TURNSTONE MIDCO 2: Fitch Affirms 'B+' IDR; Outlook Stable X X X X X X X X * BOOK REVIEW: Macy's for Sale ********* ============= B E L G I U M ============= ETHIAS SA: Fitch Affirms 'BB+' Subordinated Debt Rating ------------------------------------------------------- Fitch Ratings has affirmed Ethias S.A.'s Insurer Financial Strength (IFS) rating at 'BBB+' and Long-term Issuer Default Rating (IDR) at 'BBB'. The Outlooks are Stable. Concurrently, Fitch has also affirmed Ethias's subordinated debt at 'BB+'. Key Rating Drivers The affirmation reflects Fitch's view that Ethias's risk-adjusted capitalization will remain strong despite the unfavorable outcome of the company's dispute with the Belgian tax authorities, announced on November 28, 2014. Ethias will have to book a loss of EUR377 million as a result of the outcome but Fitch expects the company to return to profitability in 2015, given its robust underlying underwriting performance. Ethias expects to transfer the full disputed amount of EUR377m to loss reserves in 2014, despite the possibility of seeking further appeals on points of law. Fitch expects the resulting loss to be partly offset by a robust performance of the underlying business and realisation of capital gains. In 2013, operating profitability was strong at EUR226m before dividends (2012: EUR220m) with a strong technical profitability in non-life insurance, reflected in a combined ratio of 91% (2012: 92%). Despite the loss, Fitch expects regulatory solvency to remain robust at about 175% at end-2014 (end-2013: 190%) and risk- adjusted capitalization to remain supportive of the rating. Fitch believes that Ethias will rebuild its solvency margin over the next 12-24 months, predominantly supported by retained earnings, after dividends to its holding company, Vitrufin. Rating Sensitivities A reduction in the ratio of risky assets to equity to below 90% (end-2013: 144%), with the non-life combined ratio maintained below 95% and capital at a strong level, could lead to an upgrade. Key triggers for a downgrade include a decline in the Solvency I ratio to 150% without the ability to recover within a short period of time (end-2013: 190%) or failure to maintain an adequate level of profitability reflected in a combined ratio consistently above 100% (2013: 91%). The rating actions are: Ethias S.A.: IFS rating: affirmed at 'BBB+'; Outlook Stable Long-term IDR: affirmed at 'BBB'; Outlook Stable Undated subordinated debt: affirmed at 'BB+' Ethias Droit Commun AAM: IFS rating: affirmed at 'BBB+'; Outlook Stable =============== B U L G A R I A =============== PLOVDIV CITY: S&P Cuts Issuer Credit Rating to 'BB+' ---------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term issuer credit rating on the City of Plovdiv to 'BB+' from 'BBB-'. The outlook is stable. As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 [EU CRA Regulation]), the ratings on Plovdiv are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar. Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the deviation has been caused by the lowering to 'BB+' from 'BBB-' of the long-term rating on Bulgaria on Dec. 12, 2014. RATIONALE The downgrade reflects S&P's similar action on Bulgaria. Under S&P's methodology, a local or regional government (LRG) can be rated higher than its sovereign if it believes that it exhibits certain characteristics, as described in "Ratings Above The Sovereign -- Corporate And Government Ratings: Methodology And Assumptions," published Nov. 19, 2013. S&P does not currently believe that Bulgarian LRGs, including Plovdiv, meet these conditions. Consequently, S&P do not rate Plovdiv higher than Bulgaria. S&P assess Plovdiv's stand-alone credit profile (SACP) at 'bbb-'. The SACP benefits from Plovdiv's low but increasing tax-supported debt burden with low contingent liabilities. S&P also takes into account the city's average budgetary performance and its adequate liquidity, thanks to large accumulated cash reserves. S&P regards Plovdiv's budgetary flexibility as average in an international comparison. S&P's assessment of the SACP is constrained by its view of the evolving but unbalanced institutional framework for municipalities in Bulgaria, as well as S&P's assessment of Plovdiv's financial management as weak, and the weak status of Plovdiv's economy in an international comparison. S&P might revise downward Plovdiv's SACP if it notices a weakening of the institutional framework under which Bulgarian local governments operate. OUTLOOK The stable outlook reflects that on Bulgaria. Any rating action S&P takes on the sovereign would likely be followed by a similar action on Plovdiv, as long as the city's financial and economic developments remain aligned with S&P's base-case scenario. A rating upgrade for the city of Plovdiv is contingent on a positive rating action on Bulgaria, as S&P do not rate Bulgarian municipalities above the sovereign. A downgrade stemming from a deterioration of Plovdiv's SACP is unlikely, since the SACP on the city is higher than its issuer credit rating. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Rating Assessment Snapshot. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the rationale and outlook. RATINGS LIST Downgraded To From Plovdiv (City of) Issuer Credit Rating BB+/Stable/-- BBB-/Stable/-- Senior Unsecured BB+ BBB- SOFIA CITY: S&P Lowers Issuer Credit Rating to 'BB+' ---------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term issuer credit rating on the City of Sofia to 'BB+' from 'BBB-'. The outlook is stable. As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 [EU CRA Regulation]), the ratings on Sofia are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre- established calendar. Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the deviation has been caused by the lowering to 'BB+' from 'BBB-' of the long- term rating on Bulgaria on Dec. 12, 2014. Rationale The downgrade of Sofia reflects the similar action S&P took on Bulgaria. Under S&P's methodology, a local or regional government (LRG) can be rated higher than its sovereign if it believes that it exhibits certain characteristics, as described in "Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions," published Nov. 19, 2013. S&P do not currently believe that Bulgarian LRGs, including Sofia, meet these conditions. Consequently, S&P do not see a possibility that it could rate Sofia higher than Bulgaria. Based on Sofia's intrinsic credit strengths and in accordance with S&P's criteria, it assess Sofia's stand-alone credit profile (SACP) at 'bbb'. The SACP is not a rating but a means of assessing the intrinsic creditworthiness of a LRG under the assumption that there is no sovereign rating cap. The SACP on Sofia reflects S&P's view of the city's exceptional liquidity and strong budgetary flexibility, based on its significant autonomy in managing local revenues. This flexibility is somewhat constrained, however, by the city government's reluctance to raise taxes and charges ahead of municipal elections in the third quarter of 2015. Sofia's economic wealth is average compared with international peers, in S&P's view. The SACP is constrained by Sofia's evolving but unbalanced institutional framework. Combined with weak, albeit strengthening financial management, this limits the predictability of the city's financial performance. A large capital investment program will likely keep S&P's assessment of the city's budgetary performance at average, with widening deficits after capital accounts. It will also see the city's debt burden remain high, including relatively high exposure to market risks and high contingent liabilities relating to its exposures to municipal companies and a municipal bank. S&P might revise the SACP downward if it notices a weakening of the institutional framework under which Bulgarian local governments operate. Outlook The stable outlook mirrors that on Bulgaria. Any rating action S&P takes on the sovereign would likely be followed by a similar action on Sofia as long as the city's intrinsic credit characteristics remain aligned with our base-case scenario. There is no intrinsic upside scenario for Sofia because, under S&P's criteria, it does not currently rate Bulgarian municipalities above the sovereign. S&P views a downside scenario as highly unlikely because the SACP on the city is higher than the credit rating. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. RATINGS LIST Downgraded To From Sofia (City of) Issuer Credit Rating BB+/Stable/-- BBB-/Stable/-- STARA ZAGORA: S&P Revises Outlook to Stable & Affirms 'BB+' ICR --------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on the Bulgarian city of Stara Zagora to stable from positive. At the same time, S&P affirmed its 'BB+' long-term issuer credit rating on Stara Zagora. As a "sovereign rating" (as defined in EU CRA Regulation 1060/2009 [EU CRA Regulation]), the ratings on Stara Zagora are subject to certain publication restrictions set out in Art 8a of the EU CRA Regulation, including publication in accordance with a pre-established calendar. Under the EU CRA Regulation, deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation. In this case, the deviation has been caused by the lowering to 'BB+' from 'BBB-' of the long-term rating on Bulgaria on Dec. 12, 2014. Rationale The outlook revision reflects S&P's downgrade of Bulgaria. Under S&P's methodology, a local or regional government (LRG) can be rated higher than its sovereign if it considers that it exhibits certain characteristics, as described in "Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions," published Nov. 19, 2013. S&P does not currently consider that Bulgarian LRGs, including Stara Zagora, meet these conditions. Consequently, S&P do not see a possibility that it could rate Stara Zagora higher than Bulgaria. Stara Zagora's stand-alone credit profile (SACP) remains 'bb+'. The rating on Stara Zagora is constrained by the evolving but unbalanced institutional framework under which Bulgarian cities operate and Bulgaria's relatively weak economy and low wealth levels, compared with international peers. Although S&P acknowledges that Stara Zagora has strengthened its budgeting procedures, it still considers its financial management weak due to its limited track record of maintaining tight fiscal policy. The rating is supported by Stara Zagora's very low debt burden and low contingent liabilities. S&P views the city's liquidity position as adequate. S&P also considers that the city has average budgetary flexibility, mostly through its high degree of autonomy in setting taxes, which is partly offset by restricted expenditure flexibility and average budgetary performance. OUTLOOK The stable outlook on Stara Zagora mirrors that on Bulgaria. S&P could raise the rating on Stara Zagora, if it raised the rating on Bulgaria and at the same time, the city extends the maturity of its debt as planned and remains committed to keeping the debt burden modest, as targeted in its three-year budget. This would give it a slight deficit after capital accounts and sound liquidity on average over the next 18 months. S&P could lower the rating on the city if it lowered the rating on Bulgaria. Alternatively, S&P could lower the rating on the city, even if the sovereign rating remained unchanged, if within the next 18 months the city materially deviated from its financial targets and reported persistent deficits after capital accounts, leading to a rising debt burden and pressure on the city's liquidity position. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. RATINGS LIST Ratings Affirmed; CreditWatch/Outlook Action To From Stara Zagora (City of) Issuer Credit Rating BB+/Stable/-- BB+/Positive/-- Senior Unsecured BB+ UNICREDIT BULBANK: S&P Cuts Counterparty Credit Ratings to 'BB+' ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it had lowered its long- and short-term counterparty credit ratings on Bulgaria- based UniCredit Bulbank AD to 'BB+/B' from 'BBB-/A-3'. The outlook is stable. The rating action on UniCredit Bulbank follows the downgrade of Bulgaria on Dec. 12, 2014. S&P caps its ratings on UniCredit Bulbank at the level of the sovereign ratings on Bulgaria. The downgrade of Bulgaria reflects S&P's view that support to troubled banks has pushed up Bulgaria's general government debt. S&P projects weak real and nominal economic growth over 2014 to 2016 that will challenge Bulgaria's fiscal consolidation and asset quality. Moreover, the current coalition government faces tough choices in its efforts to balance fiscal prudence with measures aimed at alleviating high unemployment and weaker economic prospects. S&P considers UniCredit Bulbank to be a "strategically important" subsidiary of UniCredit Bank Austria AG (BBB+/Negative/A-2), which, in turn, is a subsidiary of Italy-based UniCredit SpA. Under S&P's group rating methodology, and in the absence of a sovereign rating constraint, it could rate UniCredit Bulbank up to three notches higher than its stand-alone credit profile (SACP) of 'bb+', subject to S&P's cap of one notch below the long-term rating on UniCredit Bank Austria. However, because S&P do not rate any banks in Bulgaria above the sovereign, the long- term rating on UniCredit Bulbank is constrained by the 'BB+' long-term sovereign credit rating on Bulgaria. Therefore, S&P no longer incorporates any notches of uplift to reflect the likelihood of group support. The stable outlook on UniCredit Bulbank reflects that on Bulgaria and S&P's expectation that the bank's financial profile will remain generally unchanged over the next two years. Moreover, S&P considers that further pressure on asset quality will not affect the bank's ability to generate capital and earnings. Any negative rating action on Bulgaria would result in a similar action on UniCredit Bulbank. In addition, in the event of a negative rating action on UniCredit SpA or UniCredit Bank Austria, S&P would review its ratings on UniCredit Bulbank. In particular, S&P would assess potential adverse effects on UniCredit Bulbank's SACP, owing to contagion risk stemming from the UniCredit group. Conversely, if S&P upgraded Bulgaria, it could take a similar rating action on UniCredit Bulbank if it remains a "strategically important" subsidiary of UniCredit Bank Austria. The likelihood of an upgrade at this time is unlikely, however. ============= I C E L A N D ============= KAUPTHING BANK: Iceland Mulls Unfreezing Assets ----------------------------------------------- Matt Jarzemsky and Charles Duxbury at The Wall Street Journal report that Iceland's government signaled last week that it is closing in on a plan that would unfreeze the assets of three failed banks for creditors owed tens of billions of dollars. According to the Journal, people familiar with the talks said at a meeting on Dec. 9, a government lawyer told some creditors that Iceland would propose a plan early next year to restructure the debt of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki. The banks, formerly the country's three largest, collapsed in 2008 after their debt-fueled overseas expansion fell apart amid the global financial crisis, the Journal recounts. The Journal relates that one of the people said the creditors have proposed a repayment plan to Iceland's central bank that would give them some of the proceeds from the bank's asset sales, a note guaranteeing a portion of future asset-sale proceeds and an equity stake in the failed banks that would give them some measure of control over the future sale of assets. According to the Journal, people familiar with the matter said hedge-fund firms Davidson Kempner Capital Management, Halcyon Asset Management LLC, and Centerbridge Partners LP are among the banks' creditors. Many of the creditors bought up the debt at a discount after the banks failed, the Journal notes. The Dec. 9 meeting suggests the government may be willing to relax those controls, which would allow the non-Icelandic creditors to be paid, the Journal states. Advisers for the creditors were given the opportunity to offer input on what they'd like to see in the restructuring plan, the Journal says citing people with knowledge of the meeting. About Kaupthing Bank Headquartered in Reykjavik, Iceland Kaupthing Bank -- http://www.kaupthing.com/-- is Iceland's largest bank and among the Nordic region's 10 largest banking groups. With operations in more than a dozen countries, the bank offers a range of services including retail banking, corporate finance, asset management, brokerage, private banking, treasury, and private wealth management. Kaupthing was created by the 2003 merger of Bunadarbanki and Kaupthing Bank. In October 2008, the Icelandic government assumed control of Kaupthing Bank after taking similar measures with rivals Landsbanki and Glitnir. As reported by the Troubled Company Reporter-Europe, on Nov. 30, 2008, Olafur Gardasson, assistant for Kaupthing Bank hf, filed a petition under Chapter 15 of title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York commencing the Debtor's Chapter 15 case ancillary to the Icelandic Proceeding and seeking recognition for the Icelandic Proceeding as a "foreign main proceeding" under the Bankruptcy Code and relief in aid of the Icelandic Proceeding. ============= I R E L A N D ============= AVOCA CLO VI: Fitch Affirms 'Bsf' Rating on Class E Notes --------------------------------------------------------- Fitch Ratings has affirmed Avoca CLO VI plc notes: EUR160.1 million Class A1 (ISIN XS0272579763): affirmed at 'AAAsf'; Outlook Stable EUR64 million Class A2 (ISIN XS0272580266): affirmed at 'AAAsf'; Outlook Stable EUR19.4 million Class B (ISIN XS0272580779): affirmed at 'AAsf'; Outlook Stable EUR31.5 million Class C (ISIN XS0272580936): affirmed at 'Asf'; Outlook Stable EUR20 million Class D (ISIN XS0272582395): affirmed at 'BBBsf'; Outlook Stable EUR23.9m Class E (ISIN XS0272583286): affirmed at 'BBsf'; Outlook Stable EUR10 million Class F (ISIN XS0272583955): affirmed at 'Bsf'; Outlook Stable EUR7 million Class V (ISIN XS0272586891): affirmed at 'BBBsf'; Outlook Stable Avoca CLO VI plc is a managed cash arbitrage securitization of secured leveraged loans, primarily domiciled in Europe. The transaction closed in 2006 and is actively managed by KKR Credit Advisors. KEY RATING DRIVERS The affirmation of the notes reflects the significant deleveraging, which balanced out the portfolio loss from restructuring the defaulted assets. The transaction exited the reinvestment period in January 2013. Instead of being reinvested, the unscheduled proceeds were used to redeem the class A1 note. As a result, the class A1 has been paid down by EUR124m and credit enhancement increased for class A1 to class E notes. The credit enhancement of the class F note had decreased by 0.36%. This is due to the 8.4m portfolio loss after restructuring the two defaulted issuers Yell and Vivarte. The assets performance has been stable. All collateral quality tests and portfolio profile tests are passing. There is no defaulted asset in the portfolio. Compared with last review, the weighted average spread decreased to 3.68% from 3.92%, the weighted average life was unchanged at 4.25. The weighted average rating factor increased to 29.2 from 28.4. The largest country exposure changed from France at the last review to United Kingdom. The peripheral exposure which is represented by Spain and Italy increased by 0.5% to 10.5%. The class V note is a combination of class D note and the equity tranche. The affirmation reflects the affirmation of the class D note. RATING SENSITIVITIES Reducing the expected recovery rates by 25% would likely result in a downgrade of the mezzanine and junior notes by two notches or a category. Increasing the default probability by 25% would indicate a potential downgrade on classes B to D by a notch and classes E and F by one category. In both scenarios the senior notes' ratings are not affected. CVC CORDATUS IV: Fitch Assigns 'B-sf' Rating to Class F Notes ------------------------------------------------------------- Fitch Ratings has assigned CVC Cordatus Loan Fund IV Limited notes final ratings: Class A: 'AAAsf'; Outlook Stable Class B1: 'AAsf'; Outlook Stable Class B2: 'AAsf'; Outlook Stable Class C: 'Asf'; Outlook Stable Class D: 'BBBsf'; Outlook Stable Class E: 'BBsf'; Outlook Stable Class F: 'B-sf'; Outlook Stable Subordinated notes: not rated CVC Cordatus Loan Fund IV Limited is a cash flow collateralized loan obligation (CLO). KEY RATING DRIVERS Average Portfolio Credit Quality Fitch expects the average credit quality of obligors to be in the 'B' category. Fitch has credit opinions on all obligors in the indicative portfolio. The covenanted minimum Fitch weighted average rating factor (WARF) for assigning final ratings is 34.0. The WARF of the identified portfolio is 33.6. High Recovery Expectation At least 90% of the portfolio will comprise senior secured obligations. Fitch views the recovery prospects for these assets as more favorable than for second-lien, unsecured and mezzanine assets. Fitch has assigned Recovery Ratings to all but one of the assets in the identified portfolio. The covenanted minimum weighted average recovery rate (WARR) for assigning final ratings is 66.0%. The WARR of the identified portfolio is 65.7%. Unhedged Non-euro Assets Exposure The transaction is allowed to invest up to 2.5% of the portfolio in non-euro-denominated assets. Unhedged non-euro assets are limited to a maximum exposure of 2.5% of the portfolio subject to principal haircuts. The manager can only invest in unhedged assets if, after the applicable haircuts, the aggregate balance of the assets is above the reinvestment target par balance. Partial Interest Rate Hedge Between 0% and 12.5% of the portfolio can be invested in fixed rate assets, while fixed rate liabilities account for 6.0%. Therefore, the transaction is partially hedged against rising interest rates. Interest Diversion Post Reinvestment Following the end of the reinvestment period, a breach of the interest diversion test will lead to 50% of interest proceeds being used for the sequential repayment of principal to the notes. TRANSACTION SUMMARY Net proceeds from the notes will be used to purchase a EUR388.6 million portfolio of European leveraged loans and bonds. The portfolio will be managed by CVC Credit Partners Group Limited. The transaction will have a four year re-investment period scheduled to end in 2019. The transaction documents may be amended subject to rating agency confirmation or noteholder approval. Where rating agency confirmation relates to risk factors, Fitch will analyze the proposed change and may provide a rating action commentary if the change has a negative impact on the ratings. Such amendments may delay the repayment of the notes as long as Fitch's analysis confirms the expected repayment of principal at the legal final maturity. If in the agency's opinion the amendment is risk-neutral from a rating perspective Fitch may decline to comment. Noteholders should be aware that confirmation is considered to be given if Fitch declines to comment. ========= I T A L Y ========= WASTE ITALIA: Fitch Assigns 'B-' Rating to 5-Yr. Secured Notes -------------------------------------------------------------- Fitch Ratings has assigned Waste Italia's five-year, 10.50% senior secured notes a final rating of 'B-'/'RR4'. Fitch has also assigned Waste Italia SpA a final Issuer Default Rating (IDR) of 'B-' with a Stable Outlook. The assignment of the final ratings follows a review of final documentation and the final transaction structure, the completion of the Geotea acquisition and the fulfillment of the conditions precedent for using the newly established super-senior revolving credit facility. While the transaction broadly conforms with the information Fitch had received when it assigned expected ratings, there have been some changes and developments in the structure of the transaction and in some of the key terms of the notes, including: -- The bond priced significantly more expensive at 10.5% and with an offering price of 92.294%, leading to a reduction of liquidity available for general corporate purposes to EUR0.5 million from an originally envisaged EUR10 million. -- Kinexia S.p.A. (the parent company) has issued the EUR10 milllion convertible bond and in addition has contributed another EUR5 million as part of the agreement relating to the RCF, thus partly offsetting the lower liquidity from the notes issue. -- The absolute amounts and the percentages of the excess cash flow offer mechanism have been revised upwards. For 2015, the excess cash flow offer amount is now EUR5 million (previously EUR2.5 million), for 2016 it is EUR7.5 million (previously EUR5 million) or 75% (previously 50%) of excess cash flow and for each of the subsequent two years EUR15 million (previously EUR15 million) or 75% of excess cash flow (previously 50%). -- The super senior headroom (the amount of debt permitted to rank ahead of the notes) has been reduced to EUR15 million from EUR25 million. With the current level of the RCF of EUR15 million, there is no super senior headroom left. The changes to the terms of the notes are viewed as slightly more creditor friendly and partly compensate for the lower coverage ratios resulting from the significantly higher coupon on the EUR200m notes. Fitch views the overall diversification and scale of Waste Italia as remaining limited following the acquisition of Geotea and the business plan as entailing substantial execution risks. Moreover, the company has to establish a record of providing bondholders with transparent and comparable information. The group now has a sizeable bullet maturity to manage in 2019, although excess cash flow amounts to be used for excess cash-flow offers have increased. KEY RATING DRIVERS Strong Market Position & Supportive Market Segment Waste Italia has a strong market position in special non- hazardous waste in north west Italy and volumes have historically displayed greater stability than other segments such as hazardous or urban waste. Industrial customers remain responsible for waste up to disposal underlining the importance of strong customer relationships. Although contract lives are relatively short (typically 6-12 months), a presence throughout the value chain is a competitive advantage and contract renewal rates are around 98%. However, special waste is unregulated and Waste Italia is relatively undiversified by geography or by technology. While EU waste policy favors incineration over landfill, Italian landfill looks set to continue to grow, based on cost advantages and the difficulty in obtaining permits for incineration. With the acquisition of Geotea, Waste Italia has also entered the market for urban waste and for hazardous waste, albeit at low relative shares. Replacing Landfill Capacity Key For Cash Flow Fitch estimates landfill accounting for approximately two-thirds of EBITDA, replenishing capacity is central to generating future cash flow to either grow the business or reduce net leverage toward the notes' maturity. This can be achieved organically and 25% additional capacity was permitted in 1H14 at Albonese or via acquisitive growth. The acquisition of Geotea increased the remaining landfill life to 6.9 from 3 years. The company's ability to maintain long-term landfill capacity is central to its credit profile, but we note that this is subject to a successful permit process, which is outside the company's control. Waste Italia has been active in this business for a considerable time and is experienced in dealing with the permit process. Additional Cash Flow Sensitivities In addition to the available landfill capacity, cash flows are sensitive to waste volumes which trend with Italian economic activity, and, in a highly fragmented market, competitive pricing pressures. However, Waste Italia's partnership structure outside north west Italy gives some flexibility to the cost base. With trade receivables averaging around 30% of revenues, there is also customer counterparty risk. Waste Italia reviewed payment terms in 2013 and now requires customer payment within 60 days. Beyond maintenance capex of EUR6m p.a. to maintain landfill life, growth capex is fully discretionary. RCF and Refinancing Provide Liquidity The shareholder capital contribution now amounts to EUR49.5m from the parent company, Kinexia. Together with the proceeds from the notes, the funds are used to fund recent acquisitions, in particular landfill companies, Faeco (EUR40.6 million) and Geotea (EUR84.3 million). The acquisition of Geotea has recently completed. Liquidity is also provided by the EUR15 million RCF that has been put in place and Waste Italia has informed Fitch that all conditions precedent have been met. The super senior debt that could be raised and rank ahead of the notes without being subject to a fixed charge or leverage test has been reduced to EUR15 million. However, there are some restrictions on the RCF. It contains a net debt/EBITDA based springing covenant that is tested once utilization exceeds 30% at the end of a quarter. Breaches do not constitute an event of default but only lead to a draw-stop under the RCF while breaches can be cured via equity injections. The RCF is restricted in its use that it must not be used to fund excess cash-flow offers and repayment of the notes leads to a mandatory repayment obligation, protecting its super-senior status at all times. The group also uses non-recourse factoring; but the programs are moderate (EUR10.1 million for Waste Italia and EUR1.4 million for Faeco). Waste Italia does not plan to pay dividends and Fitch has assumed no dividend payments in Fitch's rating case. Capital Structure and Corporate Governance While Fitch views Waste Italia's strategy to enhance the lifetime of the remaining landfill capacity and diversification into other waste treatment areas and types of waste as a means of defending and improving its business profile, the pace of expansion in 2014 is regarded as aggressive. Fitch calculates FFO adjusted net leverage on a pro-forma basis for 2014 at 4.6x. However, de- leveraging is strongly dependent on further growth, which requires both volumes and prices to increase. Fitch views some volume increases as possible, but in a competitive and low inflation environment, is cautious on pricing. Moreover, Fitch considers there is potential execution risk in strategy and regards the sizeable long-term bullet maturity as not fully matching the decreasing landfill capacity that would organically decrease in the absence of new permissions. In Fitch's ratings case, Fitch forecasts FFO adjusted net leverage to be around 4.4x in 2015 and 2016. Corporate governance aspects resulting from the relationship with Kinexia, in particular some management overlap and a high level of debt at Kinexia's other subsidiaries, are a potential risk. However, this is mitigated by adequate contractual protection in the proposed terms and conditions of the bond. The terms of the bond include a mandatory cash flow offer of EUR5 million for the year 2015, the greater of EUR7.5 million and 75% of excess cash flow for 2016 and the greater of EUR15 million and 75% of excess cash flow for 2017 and 2018. Excess cash flow is defined as EBITDA less changes in working capital, capital spending, cash interest and tax. Coverage Ratios Low based on High-Coupons Due to the high coupon at 10.5%, FFO based coverage ratios are relatively low. Fitch expects FFO interest coverage to be around 2.0x to 2.3x for the next two years, which is below our previously stated negative rating sensitivity of 2.5x. However, Fitch expects this to be temporary with the ratio recovering to a level above 2.5x in 2017 at the latest. The lower ratio is mitigated by the additional cash contributed by Kinexia (EUR5 million) and the slightly more creditor friendly terms compared to when the expected ratings were assigned. Recoveries For its recovery analysis, Fitch used the consolidated 2013 EBITDA of EUR47 million. To this, Fitch applied a discount of 15% and a distressed multiple of 3.5x. Prior ranking debt predominantly exists in the form of capital leases, factoring and the EUR15 million super senior RCF. After applying the waterfall of proceeds based on the above assumptions, Fitch computes recoveries in the range of 31-50% (RR4), resulting in no notching for the senior secured notes. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating action include: -- FFO adjusted net leverage sustainably below 4x (gross below 4.5x) and FFO interest coverage above 3.5x on a sustained basis. -- Successful implementation of the business plan, including receipt of landfill permissions as planned and reaching EBITDA of at least EUR60 million. -- Further diversification of revenue streams, lower reliance on landfill. -- Faster than anticipated reduction of total debt, bringing the capital structure more in line with the remaining landfill capacity time. Negative: Future developments that could lead to negative rating action include: -- Significantly weaker than expected operating performance. -- Substantial landfill permitting delay, potentially at Verde Imagna, resulting in remaining useful life of 3.5 years or less. -- Significant deterioration of key credit ratios (FFO adjusted net leverage above 5x, , negative free cash flow and an expectation that the FFO interest coverage ratio will not recover to 2.5x by 2017. -- Changes in financial policy, leading to substantial dividend outflows and to the loss of cash reserves to fund landfill capacity or deleveraging. =================== K A Z A K H S T A N =================== TEMIRBANK JSC: S&P Raises Counterparty Credit Ratings to 'B/B' -------------------------------------------------------------- Standard & Poor's Ratings Services said that it had raised its long- and short-term counterparty credit ratings on Kazakhstan- based Temirbank JSC to 'B/B' from 'B-/C'. The outlook is stable. At the same time, S&P raised its Kazakhstan national scale rating on Temirbank to 'kzBB' from 'kzBB-'. The upgrade reflects the announcement that Alliance Bank JSC's debt restructuring plan, which includes a merger with Temirbank and ForteBank JSC, was approved by the court on Dec. 12, 2014. This plan leads to a substantial reduction of Alliance Bank's indebtedness and restoration of its solvency. By Jan. 31, 2015, Alliance Bank's merger with Temirbank and ForteBank is expected to be complete. Temirbank will become a wholly-owned and fully integrated subsidiary of Alliance Bank. S&P therefore will consider Temirbank as a "core" subsidiary of Alliance Bank. According to S&P's Group Rating Methodology, "core" subsidiaries are rated at the level of the group credit profile, which S&P assess at 'b'. As S&P assess Temirbank's stand-alone credit profile at 'b-', the ratings benefit from one notch of uplift, as per S&P's criteria. Temirbank's core status within the combined Alliance Bank Group reflects S&P's treatment of this combination as a merger rather than an acquisition by Alliance Bank of the other two banks. S&P expects that Temirbank and ForteBank will cease to exist as legal entities in early 2015. S&P expects the integration of the three banks to take place in 2015-2016, resulting in a common information technology platform, risk management systems, and policies. The new bank will likely be rebranded as Forte Bank in 2015, as the reputation of the Alliance Bank and Temirbank brands have been tarnished by years of financial difficulties following debt restructurings. The raising of the national scale rating to 'kzBB' from 'kzBB-' and the upgrade of the subordinated debt reflects solely those ratings' relationship to the long-term global scale rating. The stable outlook on Temirbank reflects that on Alliance Bank, given Temirbank's "core" status. The stable outlook on Alliance Bank reflects S&P's view that, following the restructuring and merger with Temirbank and ForteBank, the new bank will maintain a stable competitive position in Kazakhstan's banking sector, supported by its restored capitalization and profitability. S&P expects Temirbank to keep its "core" status within the Alliance Bank Group and that the ratings and outlook on Temirbank will therefore move in tandem with the group credit profile. After the court decision, S&P sees only a marginal risk that the combination of the three banks and the full integration of Temirbank and ForteBank into Alliance Bank will not go through. But if this risk materializes, S&P would reassess its view of the group support Temirbank receives. ===================== N E T H E R L A N D S ===================== HALCYON LOAN: S&P Assigns 'B- (sf)' Rating to Class F Notes ----------------------------------------------------------- Standard & Poor's Ratings Services has assigned credit ratings to Halcyon Loan Advisors European Funding 2014 B.V.'s class A, B, C, D, E, and F senior secured floating-rate notes. At closing, Halcyon Loan Advisors European Funding 2014 also issued unrated subordinated notes. Halcyon Loan Advisors European Funding 2014 is a cash flow collateralized loan obligation (CLO) transaction securitizing a portfolio of primarily senior secured loans granted to speculative-grade European corporates. Halcyon Loan Advisors (U.K.) LLP manages the transaction. Under the transaction documents, the rated notes pay quarterly interest unless there is a frequency switch event. Following this, the notes permanently switch to semiannual payment. The portfolio's reinvestment period ends four years after the effective date, and the portfolio's maximum average maturity date is eight years after the effective date. At the end of the ramp-up period, S&P understands that the portfolio will represent a well-diversified pool of corporate credits, with a fairly uniform exposure to all of the credits. Therefore, S&P has conducted its credit and cash flow analysis by applying its criteria for corporate cash flow collateralized debt obligations. In S&P's cash flow analysis, it used a portfolio target par amount of EUR300.00 million, using the covenanted weighted- average spread (4.15%), and the covenanted weighted-average recovery rates at each rating level. Elavon Financial Services Ltd. is the bank account provider and custodian. The participants' downgrade remedies are in line with S&P's current counterparty criteria. The issuer is bankruptcy-remote under S&P's European legal criteria. Following S&P's analysis of the credit, cash flow, counterparty, operational, and legal risks, S&P believes its ratings are commensurate with the available credit enhancement for each class of notes. RATINGS LIST Ratings Assigned Halcyon Loan Advisors European Funding 2014 B.V. EUR309.9 Million Senior Secured Floating-Rate and Deferrable Notes Class Rating Amount (mil. EUR) A AAA (sf) 174.60 B AA (sf) 39.80 C A (sf) 19.00 D BBB (sf) 16.40 E BB (sf) 19.30 F B- (sf) 9.80 Sub loan NR 31.00 NR--Not rated. STICHTING HOLLAND: Fitch Affirms 'BBsf' Rating on Class D Notes --------------------------------------------------------------- Fitch Ratings has affirmed all four tranches of Stichting Holland Homes III, a Dutch RMBS transaction fully backed by mortgage loans originated by DBV Levensverzekeringsmaatschappij B.V. (DBV) (now part of SNS Bank N.V. [BBB+/Negative/F2]). The loans in the portfolio are serviced by SNS, who has appointed Stater Nederland (RPS1-) as a sub-servicer. The rating actions are: Class A (ISIN XS0233450138) affirmed at 'AAAsf'; Outlook Stable Class B (ISIN XS0233451615) affirmed at 'AAsf'; Outlook Stable Class C (ISIN XS0233452936) affirmed at 'Asf'; Outlook Stable Class D (ISIN XS0233453660) affirmed at 'BBsf'; Outlook Stable KEY RATING DRIVERS Sound Asset Performance This transaction only reports defaults that incurred a loss for the structure. This number remains very limited despite a seasoning of nine years. The relatively low original loan to value (OLTV) in comparison to rest of the Dutch market (weighted average combined loan to value [CLTV] of 60.2%) has resulted in limited arrears throughout the transaction's life. As of the September 2014 payment date no loans were in arrears by more than three months, while the collateral in arrears by less than three months was below 1% of the current pool balance. Hence, there is limited stock of arrears that could roll into default. Structure Providing Liquidity The transaction has a fully funded reserve fund (RF) of 1.16% of the current note balance, which will stop amortizing as soon as it reaches its floor of 0.5% of the initial note balance (EUR3.75 million). The RF can be used to cover shortfalls on senior fees, interest payment on all classes and replenishment of the principal deficiency ledgers for all collateralized tranches. In addition to the RF, the transaction features a liquidity facility (LF) equivalent to 2% of the current note balance and floored at 0.5% of the initial note balance. The facility can be used to cover shortfalls in interest payments on the notes after the full utilization of the RF. Finally, the deal uses a combination of an interest rate swap and a cash flow swap to hedge against the mismatch between interest rate received and due. This cash flow swap agreement provides the structure with 30 basis points (bp) guaranteed excess spread after note interest and servicing fees. RATING SENSITIVITIES The transaction has a high proportion of interest only (IO) loans. If the borrowers fail to repay the entire principal at maturity, this could lead to insufficient principal receipts and shortfalls in principal payments, eroding the liquidity within the transaction. UNITED GROUP: S&P Affirms 'B' CCR; Outlook Stable ------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' long-term corporate credit rating on Netherlands-based telecom and cable investment holding company United Group B.V. The outlook is stable. The affirmation follows United Group's recent announcement that it has concluded an agreement to acquire Slovenian mobile operator Tusmobil for EUR110 million, of which EUR84 million will be cash payable at closing. S&P calculates that the EBITDA multiple for this transaction, including initial cost synergies, is about 7x -- increasing the group's pro forma adjusted leverage in 2014 to slightly more than 6x. S&P's debt calculation is adjusted for the EUR175 million payment-in-kind loan at a top holding company, operating lease liabilities, and deferred acquisition consideration. S&P forecasts, however, that United Group will deleverage very quickly to about 5.4x in our 2015 base case. In S&P's view, the group's remaining organic growth opportunities in Serbia and Bosnia and Herzegovina -- as a result of the company's footprint expansion and increasing pay-TV and broadband penetration in these countries -- will be the main driver for continued revenue and EBITDA expansion, and S&P expects the company will deleverage to well below 6x in 2015. Therefore, S&P sees sufficient headroom under its base case for potential depreciation of Serbian dinar (RSD) versus the euro and small bolt-on acquisitions. S&P also understands that the company will likely offset dinar depreciation by increasing prices, in line with the price increases in 2013. S&P thinks, however, that given the company's meaningful leverage after this acquisition and weak free cash flow generation, it has very limited headroom under the current rating to make an additional big acquisition or recapitalization over the short term. S&P has not assumed either in its base-case scenario. "We think that the acquisition of Tusmobil could assist Slovenian subsidiary Telemach's position in the Slovenian telecom market, especially over the long term, as it will now be one of the two main players in the market to offer fully integrated fixed and mobile services. This is notably on the back of operating in a highly competitive Slovenian fixed-line market, with a relatively high penetration of fiber. We think, however, that the transaction includes some initial operating risks, notably related to a potential peak in capital expenditure (capex) required by Tusmobil in order to catch up with its key competitors, as it seems to be lagging behind in its network quality due to previous underinvestment. We also think the acquisition could entail risks related to higher-than-anticipated integration costs. The two main reasons for this are the very different branding of the cable and the mobile asset (making it potentially more costly to rebrand, and the fact that this is United Group's first mobile network-based asset," S&P said. S&P's base case assumes: -- Revenue growth of about 14% in 2014, excluding Tusmobil and about 45%-47% including consolidation of Tusmobil, resulting mainly from continued meaningful revenue growth units (RGU) growth in Serbia and Bosnia and Herzegovina, growth in revenues from content, and an acquisition of a cable asset in Slovenia. -- Organic revenue growth of about 5%-6% in 2015 resulting from continued RGU growth, but higher pricing pressures in Serbia (partially due to foreign exchange depreciation), increased competitive pressures in Slovenia, and the negative impact of a reduction in mobile termination rates in Slovenia. -- Slightly declining margins due to the addition of Tusmobil to about 41% (reported) pro forma 2014, increasing to about 42%-43% in 2015. A very high capex-to-sales ratio of 24%- 26% in 2014-2015 due to continued network expansion including Tusmobil's 4G network and high degree of customer premises equipment. -- Continued bolt-on acquisitions of about EUR30 million in 2015 (excluding Tusmobil). Based on these assumptions, S&P arrives at these credit measures: -- Debt to EBITDA of 6.2x in 2014, declining to about 5.4x in 2015, including the accrual of the payment-in-kind interest and full consolidation of Tusmobil; -- Funds from operations (FFO) to debt of 10%-11%; and -- FFO cash interest coverage of about 3.5x. The stable outlook reflects S&P's anticipation that United Group will continue to deliver solid organic growth over the next two years and at least break-even free operating cash flow. S&P anticipates that this will help the group to quickly reduce debt to EBITDA to comfortably less than 6x in 2015, with headroom for potential foreign exchange volatility and small bolt-on acquisitions. S&P may lower the rating if the company meaningfully underperforms compared with S&P's current growth assumptions, or is exposed to meaningfully higher integration costs following the acquisition of Tusmobil, resulting in significant cash burn and adjusted leverage at more than 6x in 2015. S&P could also lower the rating if EBITDA cash interest coverage were to fall below 2x. Additionally, if S&P sees a material increase in the level of priority ranking liabilities, it could have a negative impact on the company's issue rating S&P is unlikely to raise the rating over the next two years, given its view of the company's limited size, country-related risks, and its view that the capital structure will likely remain highly leveraged due to the group's aggressive financial policy. Additionally, the rating will likely remain constrained by the company's limited free cash flow generation due to its ambitious growth appetite, which S&P anticipates will result in continued high capex and bolt-on acquisitions. ============= R O M A N I A ============= MEDIAFAX GROUP: Enters Insolvency; KPMG Named Administrator ----------------------------------------------------------- Otilia Haraga at Business Review reports that Mediafax Group, owned by media mogul Adrian Sarbu, has officially entered insolvency, according to the ruling of The Bucharest Court, after submitting an official request. The Bucharest Court has nominated KPMG Restructuring as temporary legal administrator, with a fee of RON5,000, Business Review says, citing paginademedia.ro. Mediafax Group requested its own insolvency on Nov. 27, Business Review recounts. The company is being investigated under accusations of tax evasion and money laundering, Business Review relates. Mediafax Group posted in 2013 a turnover of EUR17.5 million and losses of EUR2.6 million, Business Review discloses. Romania-based Mediafax Group includes Mediafax newswire, the Gandul.info website, the magazine Business Magazin and the business daily Ziarul Financiar. =========== R U S S I A =========== BANK TAVRICHESKY: S&P Puts 'B-' CCR on CreditWatch Negative ----------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B-' long-term corporate credit rating and its 'ruBBB-' Russia national scale rating on Russia-based Bank Tavrichesky on CreditWatch with negative implications. At the same time, S&P affirmed its 'C' short-term rating on the bank. The CreditWatch placement reflects S&P's view that Bank Tavrichesky may face increasing difficulty meeting the regulatory capital requirements of the Bank of Russia in the next 90 days. In particular, this may come from the rapid devaluation of the Russian ruble (RUB) and the resulting revaluation of foreign currency denominated assets that increase risk-weighted assets. S&P currently considers Bank Tavrichesky to be at risk with regulatory capital adequacy, as measured by the central bank's N1 ratio of 10.07% as of Dec. 1, 2014, just 7 basis points (bps) above the minimum. S&P understands that Bank Tavrichesky takes proactive measures to boost its regulatory capital, with plans to attract two subordinated loans from its minority shareholder Norwegian Sparebank 1 Nord-Norge, with a value of approximately RUB362 million and RUB540 million. The bank has also planned an equity injection for the end of March 2015 of RUB504 million. While the bank expects the first subordinated debt to come before the end of 2014, S&P notes that this will be only a minor relief for the bank, providing an effect within only 70 bps in terms of the N1 ratio, according to S&P's estimates. Because S&P focuses on strong forms of capital, it foresees no immediate impact on its risk-adjusted capital ratio. Consequently, S&P believes that a necessary capital buffer will be built only after a further Tier 1 capital injection takes place or after market conditions stabilize. If S&P assumes that all of the planned capital strengthening occurs, although there would be less pressure on Bank Tavrichesky's capital position, the created capital buffer may not be sufficient to ward off the rising asset quality issues S&P expects in 2015 and the ruble's persistent weakness. Indeed, S&P observes, that according to reporting forms under Russian accounting standards, the amount of accrued but not paid interest steadily increased through 2014 to 3.3% on Nov. 1, 2014, from 1.1% of the gross loan book on Jan. 1, 2014 -- a high level compared with Russian peers. S&P also notes that the bulk of this increase was due to one large group of borrowers. While the bank expects to collect this interest in the first quarter of 2015, S&P notes that this exposure may be subject to impairment charges, further squeezing capital ratios. S&P also considers that intensifying pressure on capital is due to some fundamental pressures on the bank's business model, with high related-party lending and high foreign-currency mismatches. S&P considers that capital alone is unlikely to materially alleviate pressure in the longer term on the financial profile if these fundamental business model vulnerabilities remain. The resolution of the CreditWatch will depend on Bank Tavrichesky's ability to maintain a substantial buffer close to 100 bps above the regulatory capital ratio of the Bank of Russia. S&P will also considers the evolution of the bank's asset quality and the resilience of the business model in resolving the CreditWatch. S&P expects to have a better understanding of these matters in 90 days, because it will have greater clarity on the timing of capital injections and collection of accrued interest from the borrowers. S&P could lower the ratings by at least one notch if it sees that Bank Tavrichesky remains close to breaching the regulatory capital adequacy ratio, if S&P observes the bank's inability to collect the accrued interest resulting in deterioration of asset quality, or if S&P sees risks of instability in the business model throughout what S&P views as a complicated 2015 for Russian banks. MECHEL OAO: Net Loss Widens to US$575-Mil. in Third Quarter 2014 ---------------------------------------------------------------- Yuliya Fedorinova at Bloomberg News reports that OAO Mechel said its third-quarter net loss grew ninefold from three months earlier as foreign loans were revalued in ruble terms after the currency slumped and coking-coal prices declined for Russia's largest producer. According to Bloomberg, the company on Dec. 9 said in a filing the net loss was US$575 million compared with US$63 million in the second quarter. Mechel, controlled by former billionaire Igor Zyuzin, has lost almost three-quarters of its market value this year as it struggles to repay debt to lenders including state-run VTB Bank and OAO Sberbank after local coking coal prices excluding transport slid about 40%, Bloomberg relates. VTB demanded Mechel repay RUR47 billion (US$867 million) after the second largest Russian lender won a court decision to collect overdue debt, Bloomberg relays. According to Bloomberg, Mechel Chief Financial Officer Andrey Slivchenko said on a conference call on Dec. 9 the company agreed with OAO Gazprombank on a "compromise" debt restructuring and submitted a draft of the deal to VTB and Sberbank. Mr. Slivchenko, as cited by Bloomberg, said the company is also in talks with international banks and hopes to reach agreement with all lenders. The company's nine-month net loss was US$1.2 billion, compared with US$2.25 billion a year earlier, Bloomberg states. Mechel is a metals and mining group. TRANSTELECOM COMPANY: Fitch Corrects Dec. 15 Rating Release ----------------------------------------------------------- Fitch Ratings corrects the version of a ratings release published on Dec. 15, 2014 to include the affirmation of the Short-term IDR. Fitch Ratings has affirmed JSC Transtelecom Company's (TTK) foreign and local currency Long-term Issuer Default Ratings (IDR) at 'B+' and National Long-term rating at 'A-(rus)' and maintained a Negative Outlook on these ratings. TTK's senior unsecured debt has been affirmed at 'B+'/'RR4' and domestic senior unsecured debt at 'A-(rus)'. The Short-term IDR has been affirmed at 'B'. The Negative Outlook reflects significant execution risks of the company's strategy to increase broadband customer penetration on already covered territories and improve margins and cash flow generation. Average revenue per user (ARPU) and penetration growth may be susceptible to the deteriorating macroeconomic outlook for Russia. TTK operates a large-capacity fibre backbone network laid along Russian railways. It holds established positions in the inter- operator segment, and pursues a strategy of diversifying into end-user broadband services. The company operates under an asset-light business model and depends on its shareholder for leasing the core fibre network. KEY RATING DRIVERS Change in Broadband Strategy will Lead to Deleveraging The company significantly curtailed its broadband expansion ambitions in mid-2014 aiming to improve cash flows and reduce leverage. In Fitch's view, the new strategy should allow the company to delever to approximately 4x funds from operations (FFO) adjusted net leverage by end-2015. However, the margin for error within the current rating level is small. A failure to increase customer penetration of covered territories on a par with peers in similar locations and/or ARPU pressure on the back of difficult macroeconomic situation in Russia may compromise deleveraging efforts. The new strategy envisions an abrupt end to new broadband development. Instead, continuing marketing efforts to sell newly built broadband lines should lead to a steady increase in customer penetration. In view of a fast network expansion on previously uncovered territories in 2012-2014, Fitch believes these are realistic expectations. Customer growth should improve operating cash flow and, coupled with a dramatically reduced capex, would pave the way for deleveraging. However, a change of strategy entails substantial execution risks reflected in the Negative Outlook. A change in strategy was driven by the unfavorable regulatory situation and rising interest rates which reduces the number of commercially attractive broadband development projects, particularly small ones. Rostlelecom (BBB-/Stable), the fixed- line incumbent, was chosen as the only operator for a government- sponsored project to bridge the digital divide in less developed Russian territories. This promises to significantly increase competition in TTK's targeted areas -- the company was going to capitalize on its backbone infrastructure laid along railways across the country by building short network extensions to underpenetrated territories. Focus on Profitability, Cost Efficiency Fitch expects that TTK's margins in the broadband segment should improve with the end of one-off roll-out, connection and marketing costs, and sign-up promotions. The company's broadband and pay-TV subscriber base exceeded 1.7 million and is growing which provides for a reasonably large size necessary for sustainably profitable operations. The company remains focused on improving cost efficiency, which will contribute to stronger margins. In absolute terms, EBITDA generation should grow. However, TTK operates with a mix of low- margin segments that are likely to demonstrate significant revenue volatility with an impact on headline reported margins. Leverage, Cash Flows to Improve An end of the active development phase will turn TTK into a strongly cash flow positive company which would allow deleveraging from both absolute debt reduction and stronger EBITDA and cash flow with a positive impact on metrics. TTK's leverage is high, reported at 4.8x FFO adjusted net leverage and 3.3x net debt/EBITDA at end-2013. Fitch expects these metrics to improve to 4.3x and 3.2x respectively by end-2014, and further down to 2.8x and 4.0x respectively by end-2015. An abrupt end of the massive capex program in mid-2014 will only have a full impact in 2015 as the company will continue to settle accounts payable to contractors for accrued capex until end-2014. A significant factor behind a leverage rise was a delayed revenue recognition of Indefeasible Rights of Use (IRU) network capacity sales under IFRS standards. IRU contracts are concluded on 'take or pay' terms for a relatively long period of time, typically 10 years. Contract costs are primarily related to putting in place necessary network capacity, and buyers make a bulk of their payments at the start of the service. However, these disbursements are treated as pre-payments amortizing through the profit and loss statement over the contract life under IFRS rules. This treatment does not have an impact on cash flows, however, dramatically reduces reported revenue at an early contract phase, with reported IRU sales in later periods being non-cash. Whereas TTK achieved its targets in terms of IRU volume sales, only a fraction of these was reflected in its reported revenues. Outperformance in the Shrinking Inter-Operator Segment TTK has outperformed its competitors in a shrinking inter- operator wholesale market reporting market share gains. Fitch expects some outperformance to continue in the short to medium term but it is not sustainable in the long run and the segment revenue will remain under pressure. Counter-intuitively, an economic slowdown in Russia may mitigate this negative trend. Large telecoms operators tend to skimp on investing into new backbone infrastructure and prefer to continue relying on leasing network capacity from independent providers such as Transtelecom. Relationship with Shareholder Fitch rates TTK on a standalone basis. Legal ties are weak between TTK and its parent JSC Russian Railways (RZD) ('BBB'/Negative) as the latter does not guarantee TTK's debt. Owning a telecoms company is not strategic for a railway operator. However, operating ties are strong and RZD is likely to retain control over TTK in the medium term at least. Any divestment plans are likely to be limited to selling a minority stake in the company. TTK provides critical telecom and maintenance services to RZD. Replacing it as a core telecoms operator is not a feasible option for the railway monopoly, at least not in the span of three to five years. Liquidity At end-1H14 the company had sufficient liquidity to cover its debt maturities until the end of this year. TTK's 2015 debt maturities of approximately RUB3.6bn will be covered by positive free cash flow and RUB3bn of new debt that the company expects to raise by end-2014. RATING SENSITIVITIES Negative: Insufficient broadband growth, ARPU declines and/or additional pressures in the inter-operator segment leading to a sustained rise in leverage to above 3.0x net debt/EBITDA and 4.0x FFO adjusted net leverage without a clear path for deleveraging will likely lead to a downgrade. Liquidity and refinancing pressures may also be negative. Positive: Ratings may be stabilized if the company manages to improve EBITDA generation in the broadband segment and reduce leverage to below downgrade triggers. ============= U K R A I N E ============= MRIYA AGRO: CFO Resigns Amid US$1-Bil. Debt Restructuring --------------------------------------------------------- Julie Miecamp and Daryna Krasnolutska at Bloomberg News report that Mriya Agro Holding Plc's said its chief financial officer is leaving the company as it seeks to restructure US$1 billion of debt. Oleksander Cherniavskiy's departure follows the Ukranian agricultural group's offer to cede control to creditors, Bloomberg says, citing an e-mailed statement from Mriya. Tension between management and lenders has been growing since Mriya said in August it missed payments on some of its obligations, Bloomberg notes. According to Bloomberg, Mriya said on Dec. 16 that creditors should reach an agreement on the restructuring by year-end, or the group would have to cut jobs and start bankruptcy proceedings for some units. The company is struggling as Ukraine's conflict with pro-Russian rebels in eastern regions pushes the country's economy into the deepest recession since 2009, Bloomberg states. "We understand that economically Mriya belongs to lenders," Chief Executive Officer Vladyslav Luhovskiy, as cited by Bloomberg, said on the company's website. "A number of legal processes, initiated by our lenders as well as absence of lender's consolidated position on restructuring terms doesn't allow the group to survive in current situation." Mriya Agro Holding Plc is a Ukraine-based agricultural producer. * * * AS reported by the Troubled Company Reporter-Europe on Nov. 3, 2014, Fitch Ratings downgraded Ukraine-based agricultural producer Mriya Agro Holding Public Limited's Long-term foreign currency Issuer Default Rating (IDR) to 'RD' (Restricted Default) from 'C'. The downgrade to 'RD' follows the uncured default on a coupon payment in Sept. 2014, following the expiry of a 30-day grace period, and no subsequent coupon payment or public announcement about material progress of debt restructuring discussions with its creditors. As a result Fitch believes that a distressed debt exchange (DDE) is inevitable, which is likely to lead to significant losses for Mriya's bondholders and other creditors. =========================== U N I T E D K I N G D O M =========================== CO-OPERATIVE BANK: Fails Bank of England Stress Test ---------------------------------------------------- John-Paul Ford Rojas at Belfast Telegraph reports that the Co-operative Bank has failed a Bank of England test to see how lenders would cope with severe economic stress. The troubled Co-op must cut its loan book by GBP5.5 billion, Belfast Telegraph says. According to Belfast Telegraph, the Bank, which is led by Mark Carney, found that a severe downturn with house prices plunging 35% would wipe out the Co-op's capital because of the effect on its risky commercial property and sub-prime home loans. The test examined how lenders' balance sheets would stand up to a potential Doomsday scenario of economic crisis by calculating the ratio of capital against loan assets on their balance sheets in such an event, Belfast Telegraph discloses. The Co-operative Bank is a retail and commercial bank in the United Kingdom, with its headquarters in Balloon Street, Manchester. * * * As reported by the Troubled Company Reporter-Europe on April 25, 2014, Moody's Investors Service downgraded by one notch to Caa2 the Co-Operative Bank Plc's senior unsecured debt and deposit ratings, and maintained the negative outlook on the ratings. The bank's standalone bank financial strength rating (BFSR) was affirmed at E, which is equivalent to a baseline credit assessment (BCA) of ca. The BFSR has a stable outlook. EUROSAIL-UK 2007-4BL: Fitch Lifts Rating on Class D1a Notes to CC ----------------------------------------------------------------- Fitch Ratings has withdrawn its rating on Eurosail-UK 2007-4BL PLC's class A3a, A3c and B1a notes and assigned ratings to the new class A3, A4, A5 and B1a notes. The agency has also upgraded Class A2a, C1a and D1a notes and affirmed Class E1c following the transaction restructuring. The transaction is a securitization of first-charge, near-prime and sub-prime residential mortgages originated by Southern Pacific Mortgage Limited, Preferred Mortgages Limited, Alliance and Leicester Plc and Matlock Bank Limited. Following the bankruptcy of the transaction's EUR/GBP currency swap provider, Lehman Brothers, a stipulated claim amount of USD175 million had been agreed with the issuer. Up until November 12, 2014, the issuer had received USD89.8 million of these claims and the remaining amount was monetized in an auction on November 13, 2014, resulting in sales proceeds worth USD26 million. The aggregated proceeds of USD116 million received by the issuer represent approximately 66% of the stipulated claim amount, all of which were converted into GBP74 million. KEY RATING DRIVERS Currency Exposure Removed The first phase of restructuring involved a redenomination of the class A2a, A3a, B1a, C1a and D1a notes to GBP from EUR at the spot rate of GBP0.78625 to EUR1. Following redenomination on the September 2014 interest payment date (IPD), on the December 2014 IPD, cash recoveries from the terminated hedging agreement, supplemented by a reserve fund of GBP3.3 million were applied towards restructuring costs. A payment to residual certificate holders was also made. The issuer also made a partial redemption on each of the classes A3a, A3c, B1a, C1a, D1a and E1c. Following these payments, the reserve fund was brought back to the same level of GBP3.3 million. The class B1a notes incurred a write-up of 7.7% (GBP3.1 million) in order to restore the balance between mortgage assets and notes. The write up comes as a result of excess proceeds being available from claims received from the swap termination, which were sufficient to cover the under-collateralization following redenomination. Revised Capital Structure In the second phase of restructuring, the existing class A3a and A3c notes were cancelled and simultaneously, new A3, A4 and A5 notes have been issued, such that their aggregate balance is equivalent to that of the combined balance of pre-restructured class A3a and A3c notes. The current level of credit support available to the A2, A3, A4, A5, B1a, C1a, D1a, and E1c notes is 78%, 43%, 34%, 29%, 19%, 9%, 3% and 1% respectively. The credit enhancement is provided by a GBP3.3m reserve fund that is permitted to amortize once it reaches 2% of the outstanding note balance (currently 0.84%) with no floor. The amortization of the reserve fund is subject to, amongst other conditions, three-months plus arrears (excluding delinquencies owing to outstanding fees and charges) not exceeding 17.5% of the current portfolio balance. Fitch has conducted a full asset and cashflow analysis of the transaction resulting in upgrades and affirmations of the existing notes. Simultaneously, the ratings on the class A3a, A3c and B1a notes were withdrawn and ratings of 'AAAsf', 'AAsf', 'AA-sf' and 'BBB+sf' were assigned to the class A3, A4, A5 and B1a notes respectively, reflecting the net positive impact of the transaction restructuring. As a comparison the previous class A3a and A3c note were rated 'CCsf'. Liquidity Support From the December 2014 IPD, principal receipts up to a cumulative amount of GBP2.5 million will be diverted towards the establishment of a liquidity reserve. This liquidity reserve will be available to cover interest shortfalls on the class A2 and A3 notes. It will amortize to 1% of the sum of the balance of class A2 and A3 notes from December 2015 provided that it is fully funded in the prior period. Other amortization triggers also include: no requirements for drawings on the then current payment date, three months plus arrears excluding repossessions below 22.5% of the outstanding portfolio balance, cumulative balance of loans with properties in possession below 17.5% of the original pool balance and cumulative loss below GBP19.5 million from day of restructuring. Following a full depletion of the liquidity reserve, the transaction structure will allow principal collections to be diverted to cover interest shortfalls on the class A2, A3, A4 and A5 notes. Margin Increase Following restructuring, the margin on the class A3, A4, and A5 notes is 95bps, higher than that paid on the class A3a and A3c notes prior to restructuring. The margin on the A2, B1a and C1a also increased from 16bps, 36bps and 65bps to 30bps, 100bps and 125bps respectively. Fitch's analysis showed that the level of credit enhancement, along with other transaction features sufficiently mitigate this increased cost of the structure. RATING SENSITIVITIES Fitch believes that a sudden sharp increase in interest rates will put a strain on borrower affordability, particularly given the weaker profile of the underlying non-conforming borrowers. If defaults and associated losses increase beyond the agency's stresses, the junior tranches may be downgraded. Fitch has taken these rating actions: Class A2a (XS 0311680747): upgraded to 'AAAsf' from 'BBsf'; Outlook Stable Class A3a (XS 0311702657): Withdrawn Class A3c (XS 0311704356): Withdrawn Class A3 (XS 1150797600): assigned 'AAAsf'; Outlook Stable Class A4 (X S1150799481): assigned 'AAsf'; Outlook Stable Class A5 (XS1150799721): assigned 'AA-sf'; Outlook Stable Class B1a (XS0311705759): Withdrawn Class B1a (XS0311705759): assigned 'BBB+sf'; Outlook Stable Class C1a (X50311708696): upgraded to 'Bsf' from 'Csf'; Outlook Stable Class D1a (XS0311713001): upgraded to 'CCsf' from 'Csf', Recovery Estimate of 50% Class E1c (XS0311717416): affirmed at 'Csf'; Recovery Estimate of 0% JJB SPORTS: Ex-Chief Sentenced to Four Years in Prison ------------------------------------------------------ Irish Times reports that the former chief executive of failed retailer JJB Sports, once a British household name, was sentenced to four years in prison for a GBP1 million fraud. Christopher Ronnie's sentence was for three offences of fraud, the Serious Fraud Office said, according to Irish Times. The report notes that Mr. Ronnie was also sentenced to one year in prison for two offences of furnishing false information, but that sentence will run concurrently with the fraud sentence. JJB Sports was founded by former professional footballer Dave Whelan in the 1970s and became one of Britain's largest sportswear retailers, the report discloses. But it went into administration in 2012 with the loss of more than 2,000 jobs following mounting losses and debts, the report relates. The SFO said David Ball and David Barrington, beneficial owners of Fashion and Sport Ltd, a supplier to JJB, were also each sentenced to 18 months in prison for two offences of attempting to pervert the course of justice, the report relates. The report discloses that the trio were convicted last month as a result of an SFO investigation into JJB. The five-year investigation centred on Ronnie's failure to declare three cash payments made from the JJB suppliers in 2007 and 2008 as well as attempts to destroy evidence and mislead the SFO, the report relays. "It was very greedy . . . this was a flagrant and disgraceful breach of your duty as a CEO of a Plc. It was dishonest in the extreme," said Judge Nickolas Loraine-Smith, when sentencing Mr. Ronnie, the report notes. The report relays that the Serious Fraud Office said the trio hid information regarding their dealings from both JJB's board of directors and the SFO. The SFO is bringing a separate case against JJB's former chairman David Jones and his son Stuart, who was head of marketing, the report notes. That case center on alleged forgery and misleading statements made to the market in 2009, the report recalls. An April trial was abandoned due to David Jones's ill health, the report says. A new trial date has been set for February, the report adds. MORSTON ASSETS: Fails to Secure Funding, Administrators Appointed ----------------------------------------------------------------- ED24 reports that Rob Croxen, Allan Graham and Blair Nimmo, restructuring partners at KPMG, were appointed administrator to Norfolk-based Morston Assets Limited and also as administrators and fixed charge receivers over certain of the Group's subsidiaries and properties. "Unfortunately, after many months attempting to raise finance in order to complete regeneration and development projects, new funds have not been secured. The directors felt that there was no other option but to put the business into administration in order to protect current projects and to preserve value for creditors," the report quoted Mr. Croxen as saying. The report notes that administrators have been appointed to Morston Assets Limited, Morston Archway Limited and Morston Management Limited which do not own any properties. They have also been appointed to Morston Whitecross Limited which owns properties in Whitecross and Falkirk, Yours Communities Coatbridge 1 and 2 Limited, the report relates. The company employs 28 people and specializes in mixed use regeneration and development projects throughout the UK. It was also heavily involved in a number of projects in West Norfolk including Morston Point, Horsleys Chase, Saddlebow Road, and Willows Business Park as well as Morston House in Holt. It also owns land on the proposed Nar-Ouse development project, however the move will not affect neighbouring West Norfolk council schemes for new housing. NANDAN CLEANTEC: Shares Suspended as it Goes Into Administration ---------------------------------------------------------------- Alliance News reports that Nandan Cleantec PLC shares were suspended from trading on AIM at the company's request, after it ran out of money and the board put the company into administration. In a statement, biofuel producer Nandan said it intends to appoint Bijal Shah of RE10 and Paresh Shah of Parker Wood as joint administrators, according to Alliance News. Arden Partners has stepped down as the company's nominated adviser with immediate effect, the report notes. "The company has continued to experience significant restrictions around working capital availability. Although the directors have sought further financing to allow the company to continue trading, such financing has not been forthcoming," the company said, the report notes. Nandan shares were suspended before the market opened. RANGERS FOOTBALL: Manager Offers Resignation -------------------------------------------- 98fm.com reports that Rangers Football Club PLC Manager Ally McCoist has offered his resignation. The club has confirmed to the Stock Exchange that McCoist has entered a 12-month notice period, according to 98fm.com. "The company announces that Alastair McCoist, manager of the first team squad, has resigned," said the statement obtained by the news agency. "His service contract dated December 28, 2010, which was subsequently amended, has a 12-month notice period," the statement added. The report relates that Mr. McCoist will receive a salary increase as he serves the yearlong notice period. "The directors will hold discussions with Mr. McCoist to seek an amicable solution in the best interests of the company, and expect to be in a position to make a further announcement before the end of the week," the statement said, the report discloses. "During the notice period, Mr. McCoist's salary will increase significantly to GBP750,000 per annum," the statement added. The former Rangers striker has been in charge since July 2011, the report relates. Mr. McCoist guided the club to Scottish football's second tier after they went into administration and was banished to the bottom division, the report says. About Rangers Football Club Rangers Football Club PLC -- http://www.rangers.premiumtv.co.uk/ -- is a United Kingdom-based company engaged in the operation of a professional football club. The Company has launched its own Internet television station, RANGERSTV.tv. The station combines the use of Internet television programming alongside traditional Web-based services. Services offered include the streaming of home matches and on-demand streaming of domestic and European games, which include dedicated pre-match, half-time and post- match commentary. The Company will produce dedicated news magazine and feature programs, while the fans can also access a library of classic European, Old Firm and Scottish Premier League (SPL) action. Its own dedicated television studio at Ibrox provides onsite production, editing and encoding facilities to produce content for distribution on all media platforms. TALL TREES GARDEN: Center Site to be Sold by ES Group ----------------------------------------------------- Hortweek reports that property consultants ES Group has put the property of Tall Trees Garden Centre and Nottingham Aquatic Centre up for sale under a best bid system. The client will sell to whichever offer it wants to take forward, according to Hortweek. The report notes that ES Group said the business closed in August after going into administration and the property rather than the business is for sale. Joint administrators were Christopher Farrington and Dominic Wong of Deloitte LLP, the report discloses. The business was 35 years old and the site is 1ha in size, with a GBP500,000 turnover, the report relays. TURNSTONE MIDCO 2: Fitch Affirms 'B+' IDR; Outlook Stable --------------------------------------------------------- Fitch Ratings has affirmed UK-based primary care dental services provider Turnstone Midco 2 Limited's (Integrated Dental Holdings, IDH) Long-term Issuer Default Rating (IDR) at 'B+'. The Outlook on the Long-term IDR is Stable. The affirmation reflects IDH's solid market position as the number one player in the UK National Health Service (NHS) dental sector and its solid profit generation. IDH is more than double the size of its next biggest competitor, Oasis Healthcare, and benefits from economies of scale, vertical integration into dental supply services and close relationship with the NHS. The ratings are constrained by the group's high adjusted leverage, forthcoming regulatory reform, lack of geographic diversification, slightly heightened integration risk and its exposure to NHS contracts together with pricing pressure. The Stable Outlook is underpinned by IDH's stable cashflow driven by long term evergreen contracts accounting for around 70% of revenue, its successful track record of acquiring and integrating small dental practices and steady prospects of deleveraging. KEY RATING DRIVERS Weakened Credit Metrics IDH's leverage is very high. Fitch expects it to continue de- leveraging over the rating horizon, albeit at a slower rate than Fitch originally forecasts in May 2013. Fitch now expects pro- forma funds from operations adjusted net leverage to reach a high of 6.8x at FY15 (ending March) to around 5.9x at FY16 as opposed to about 5.0x, due to the debt-funded acquisition of Dental Directory, which is mitigated by expected cost savings from vertical integration. Industry Consolidation Driving Growth IDH's growth will primarily be driven by acquisitions and to a lesser extend from the private sector as organic growth continues to be constrained by pricing pressure within its NHS contracts. Underlying growth was very low for 1H14 driven by private fee increases, additional services and increased volumes. Fitch's expectation that NHS spending will remain subdued supports the rating. Rebranding Enhances Leading Position The rating assumes that the introduction of its new 'my dentist' brand will boost IDH's corporate image in the fragmented UK NHS dental sector worth GBP3.6 billion in 2013/2014, in which it enjoys a leading market position. If successful, the new brand; currently being introduced into 15% of the IDH portfolio, will be rolled out to the entire estate by end FY16. This will further improve its market position in which it holds around 5% of UK market share. IDH had 621 practices as at September 2014, which is more than double the number than its closest peer, Oasis Dental Care. Acquisition Risk Manageable Fitch believes management has the ability to control slightly heightened integration risk following the larger acquisition of leading dental supply business, Dental Directory in April 2014, given its track record so far. Fitch do not envisage any further large purchases and the group continues to successfully implement its strategy to acquire about 40 to 60 small practices per annum spending around GBP1m per transaction for EBITDA multiples of around 4.5-6.0x. Regulatory Reforms Broadly Neutral The ratings also reflect the risks associated with the regulatory reforms in the dentistry market in the UK. Fitch recognizes the risk that the reimbursement method from the NHS to private dental service providers is likely to change. However, any changes in contracts are only likely to be introduced around 2017. Protection of the value of the contract is also provided by the current involvement of IDH in the government's pilot scheme in the design of contracts, as well as by its incumbent position. Free Cash Flow Improving Fitch expects free cash flow as a percentage of revenues to improve to 1.5% at FY15 from -2.4% at FY14 and to return to more normalized levels of around 5% by FY17. It was negative in FY14 due to increased interest expenses and increased capex for the upgrade of equipment, IT infrastructure and refurbishment of newly acquired practices. Additionally, the company also incurred one-off costs in relation to the refinancing of its capital structure in May 2013. Senior Debt Recovery Prospects In Fitch's assumptions, it has taken the higher value derived from a going concern scenario, due to the high value associated with NHS contracts in the practices acquired by IDH. As a result, the senior secured bondholders receive an above average recovery of 'BB-'/'RR3'. Fitch considers the position of senior bondholders weaker thus supporting recoveries at 'B-'/'RR6' in a distressed scenario. LIQUIDITY & DEBT STRUCTURE Fitch believes IDH's liquidity is satisfactory, with GBP7 million of readily available cash available as at September 2014 together with GBP87 million of an undrawn committed revolving credit facility (RCF) available and no short-term debt maturities due. IDH has a positive working capital position and therefore Fitch do not adjust its definition of cash available for debt service. The maturity profile is well spread with the senior secured and second lien notes due in 2018 and 2019, respectively. IDH also has a GBP100 million super senior RCF due in June 2018 with a covenant requirement for gross leverage to stay below 2.3x. RATING SENSITIVITIES Positive: Future developments that could lead to positive rating action include: -- IDH's ability to increase its diversification and scale via acquisitions without diluting profits or FCF, while maintaining FFO adjusted net leverage below 4.5x on a sustained basis. -- FFO fixed charge coverage above 2.5x. Negative: Future developments that could lead to negative rating action include: -- Reduced free cash flow in the low single digits as a % of sales, as a result of an unsuccessful acquisition strategy. -- Weaker credit metrics such as FFO adjusted net leverage above 6.0x or FFO fixed charge coverage below 2.0x on a sustained basis. Full List of Rating Actions: Turnstone Midco 2 Limited Long-Term IDR: affirmed at 'B+'; Outlook Stable IDH Finance plc Senior secured fixed rate notes; affirmed at 'BB-'/'RR3' Senior secured FRN; affirmed at 'BB-'/'RR3' Second lien notes; affirmed at 'B-'/'RR6' =============== X X X X X X X X =============== * BOOK REVIEW: Macy's for Sale ------------------------------ Author: Isadore Barmash Paperback: 180 pages List price: $34.95 Review by Henry Berry Order your personal copy today at http://is.gd/as56m0 Isadore Barmash writes in his Prologue, "This book tells the story of Macy's managers and their leveraged buyout, the newest and most controversial device in the modern financial armament" when it took place in the 1980s. At the center of Barmash's story is Edward S. Finkelstein, Macy's chairman of the board and chief executive office. Sixty years old at the time, Finkelstein had worked for Macy's for thirty-five years. Looking back over his long career dedicated to the department store as he neared retirement, Finkelstein was dismayed when he realized that even with his generous stock options, he owned less than one percent of Macy's stock. In the years leading up to his unexpected, bold takeover, Finkelstein had made over Macy's from a run-of-the-mill clothing retailer into a highly profitable business in the lead of the lucrative and growing fashion and "lifestyle" field. To aid him in accomplishing the takeover and share the rewards with him, Finkelstein had brought together more than three hundred of Macy's top executives. To gain his support for his planned takeover, Finkelstein told them, "The ones who have done the job at Macy's are the ones who ought to own Macy's." Opposing Finkelstein and his group were the Straus family who owned the lion's share of Macy's and employees and shareholders who had an emotional attachment to Macy's as it had been for generations, "Mother Macy's" as it was known. But the opponents were no match for Finkelstein's carefully laid plans and carefully cultivated alliances with the executives. At the 1985 meeting, the shareholders voted in favor of the takeover by roughly eighty percent, with less than two percent opposing it. The takeover is dealt with largely in the opening chapter. For the most part, Barmash follows the decision making by Finkelstein, the reorganization of the national company with a number of branches, the activities of key individuals besides Finkelstein, 160Macy's moves in the competitive field of clothing retailing, and attempts by the new Macy's owners led by Finkelstein to build on their successful takeover by making other acquisitions. Barmash allows at the beginning that it is an "unauthorized book, written without the cooperation of the buying group." But as he quickly adds, his coverage of Macy's as a business journalist and his independent research for over a year gave him enough knowledge to write a relevant and substantive book. The reader will have no doubt of this. Barmash's narrative, profiles of individuals, and analysis of events, intentions, and consequences ring true, and have not been contradicted by individuals he writes about, subsequent events, or exposure of material not public at the time the book was written. First published in 1989, the author places the Macy's buyout in the context of the business environment at the time: the aggressive, largely laissez-faire, Reagan era. Without being judgmental, the author describes how numerous corporations were awakened from their longtime inertia, while many individuals were feeling betrayed, losing jobs, and facing uncertain futures. Isadore Barmash, a veteran business journalist and author, was associated with the New York Times for more than a quarter- century as business-financial writer and editor. He also contributed many articles for national media, Reuters America, and the Nihon Kenzai Shimbun of Japan. He has published 13 books, including a novel and is listed in the 57th edition of Who's Who in America. ********* 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 202-362-8552. * * * End of Transmission * * *