/raid1/www/Hosts/bankrupt/TCREUR

/raid1/www/Hosts/bankrupt/TCREUR_Public/150305.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 Thursday, March 5, 2015, Vol. 16, No. 45 Headlines I R E L A N D AURIUM CLO I: S&P Assigns Prelim. 'B' Rating to Class F Notes EUROPEAN PROPERTY 3: Moody's Cuts Ratings on 2 Note Classes to C L U X E M B O U R G ENDO LUXEMBOURG: Moody's Says Divestiture Is Credit Positive N E T H E R L A N D S GROSVENOR PLACE: S&P Raises Rating on Class E Notes to 'B-' NXP SEMICONDUCTORS: Moody's Affirms 'Ba2' CFR; Outlook Positive N O R W A Y NORWEGIAN ENERGY: Shareholders Back Restructuring Plan SCANA STEEL: Files for Bankruptcy Following Losses P O L A N D * POLAND: Records 60 Corporate Bankruptcies in February P O R T U G A L SAGRES' DOURO: S&P Lowers Rating on Class A Notes to 'BB' * Portuguese Mortgage Arrears Slow But Defaults Peak, Fitch Says R U S S I A AHML INSURANCE: Moody's Affirms 'Ba2' Financial Strength Rating HOME CREDIT: Moody's Lowers Long-Term Deposit Ratings to 'B2' MECHEL OAO: Taps Rotschild to Help with Debt Restructuring S P A I N HIPOCAT 8: S&P Affirms 'CCC' Rating on Class D Notes MADRID RMBS I: Fitch Cuts Rating on Class C Tranche to 'B-sf' REYAL URBIS: Net Loss Down 14% to EUR694 Million in 2014 TDA 31: Moody's Raises Rating on EUR14.5MM C Notes to 'B2' U N I T E D K I N G D O M ACE TRAVEL: HMRC Winding up Order Drives Firm to Liquidation AFRREN PLC: Defaults on US$15-Mil. Debt Payment Amid Rescue Talks JAGUAR LAND: S&P Rates Proposed US$500MM Sr. Unsecured Bonds 'BB' ********* ============= I R E L A N D ============= AURIUM CLO I: S&P Assigns Prelim. 'B' Rating to Class F Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary credit ratings to Aurium CLO I Ltd.'s class A, B, C, D, E, and F senior secured floating-rate notes. At closing, Aurium CLO I will also issue unrated subordinated notes. Aurium CLO I is a cash flow collateralized loan obligation (CLO) transaction securitizing a portfolio of primarily senior secured loans granted to speculative-grade European corporates. Spire Partners LLP will manage the transaction. Under the transaction documents, the rated notes will pay quarterly interest unless there is a frequency switch event. Following such an event, the notes would switch to semi-annual payment. The portfolio's reinvestment period will end four years after the closing date, and the portfolio's maximum average maturity date will be eight years after the closing 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 the portfolio target par amount of EUR300.00 million, the covenanted weighted-average spread (4.1%), the covenanted weighted-average coupon (6.25%), and the covenanted weighted-average recovery rates at each rating level. Deutsche Bank AG, London Branch will be the bank account provider and custodian. At closing, S&P anticipates that the participants' downgrade remedies will be in line with its current counterparty criteria. At closing, S&P considers that the issuer will be bankruptcy remote, in accordance with its European legal criteria. Following S&P's analysis of the credit, cash flow, counterparty, operational, and legal risks, S&P believes its preliminary ratings are commensurate with the available credit enhancement for each class of notes. RATINGS LIST Preliminary Ratings Assigned Aurium CLO I Ltd. EUR308.77 Million Senior Secured Floating-Rate Notes (Including EUR30.52 Million Subordinated Notes) Class Prelim. Prelim. rating amount (mil. EUR) A AAA (sf) 179.50 B AA (sf) 33.50 C A (sf) 18.00 D BBB (sf) 15.50 E BB (sf) 21.00 F B (sf) 10.75 Sub loan NR 30.52 NR--Not rated. EUROPEAN PROPERTY 3: Moody's Cuts Ratings on 2 Note Classes to C ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings of class C and class D Notes issued by European Property Capital 3 p.l.c. Moody's rating action is as follows: -- EUR32.1 million C Notes, Downgraded to C (sf); previously on Apr 4, 2014 Affirmed Caa3 (sf) -- EUR31.312 million D Notes, Downgraded to C (sf); previously on Apr 4, 2014 Affirmed Ca (sf) Moody's does not rate the Class X Notes. The downgrade reflects Moody's increased loss expectation for the pool since its last review. The sale agreements have been executed for the last two properties securing the single remaining loan in the pool, the Randstad loan. Based on the reported purchase prices, expected losses on Class C notes range between 80%-90% of the current balance and 100% on the class D notes. The principal methodology used in this rating was Moody's Approach to Rating EMEA CMBS Transactions published in December 2013. Other factors used in this rating are described in European CMBS: 2014-16 Central Scenarios published in March 2014. Given the current ratings levels, no further downgrade of the ratings are expected. The main factors or circumstances that could lead to an upgrade of the ratings are significantly higher than expected proceeds from property sales. =================== L U X E M B O U R G =================== ENDO LUXEMBOURG: Moody's Says Divestiture Is Credit Positive ------------------------------------------------------------ Moody's Investors Service commented that the sale of Endo International plc's male urology health and prostate health businesses to Boston Scientific is credit positive for Endo. The total consideration is up to US$1.65 billion, including US$1.6 billion in upfront cash, and the transaction is expected to close in the third quarter of 2015. There are no immediate changes to Endo's current ratings, including the Ba3 Corporate Family Rating of Endo Luxembourg Finance I Company S.a.r.l., or the stable rating outlook. Headquartered in Luxembourg, Endo Luxembourg Finance I Company S.a.r.l. is a subsidiary of Endo International plc, which is headquartered in Dublin, Ireland (collectively "Endo"). Endo is a specialty healthcare company offering branded and generic pharmaceuticals and medical devices. Including the predecessor company Endo Health Solutions, Inc., net revenues in 2014 were approximately $2.9 billion. ===================== N E T H E R L A N D S ===================== GROSVENOR PLACE: S&P Raises Rating on Class E Notes to 'B-' ----------------------------------------------------------- Standard & Poor's Ratings Services raised its credit ratings on Grosvenor Place CLO III B.V.'s class A-1, A-2, A-3, B, C, D, and E notes. The upgrades follow S&P's analysis of the transaction using data from the trustee report dated Dec. 31, 2014, and the application of its relevant criteria. Since S&P's March 15, 2013 review, the rated notes have benefited from an increase in par coverage and from the increase in the portfolio's weighted-average spread to 4.27% from 4.03%. Par coverage Class Current Amount as Current par as of Amount of Deferrable coverage (%) March 2013 (mil. EUR) March 2013 Interest [2] (%) [2] A-1 34.81 123.93 No 82 42 A-2[1] 37.59 125.42 No 82 42 A-3 62.00 62.00 No 54 27 B 36.50 36.50 Yes 37 18 C 20.00 20.00 Yes 28 13 D 28.50 28.50 Yes 16 6 E 14.00 14.00 Yes 9 2 Sub. 40.50 40.50 N/A 0 0 [1] Non-euro amounts are converted into euro using the then current spot rates of exchange. [2] Par coverage = (principal amount of the portfolio of non- defaulted assets + expected recoveries on defaulted assets + cash in the principal account - notes and senior notes principal balance) / principal amount of the portfolio of non-defaulted assets. Sub.--Subordinated. N/A--Not applicable. S&P subjected the capital structure to its cash flow analysis to determine the break-even default rate (BDR) for each class of notes at each rating level. BDRs represent our estimate of the level of asset defaults that the notes can withstand and still fully pay interest and principal to the noteholders. As a result of the developments, S&P believes the rated notes are now able to withstand a larger amount of asset defaults. S&P has estimated future defaults in the portfolio in each rating scenario by applying its criteria. S&P's analysis shows that the available credit enhancement for all classes of rated notes is now commensurate with higher ratings than previously assigned. Therefore, S&P has raised its ratings on the class A-1, A-2, A-3, B, C, D, and E notes. Grosvenor Place CLO III is a cash flow CDO transaction managed by CQS Cayman Limited Partnership. A portfolio of loans to speculative-grade corporate firms backs the transaction. Grosvenor Place CLO III closed in August 2007 and its reinvestment period ended in October 2013. RATINGS LIST Grosvenor Place CLO III B.V. EUR450 Million Senior-Secured Floating-Rate Notes Rating Rating Class Identifier To From A-1 39927PAA0 AAA (sf) AA+ (sf) A-2 39927PAB8 AAA (sf) AA+ (sf) A-3 39927PAE2 AAA (sf) A+ (sf) B 39927PAF9 A+ (sf) A (sf) C 39927PAG7 BBB+ (sf) BBB (sf) D 39927PAH5 B+ (sf) CCC+ (sf) E 39927PAJ1 B- (sf) CCC- (sf) NXP SEMICONDUCTORS: Moody's Affirms 'Ba2' CFR; Outlook Positive --------------------------------------------------------------- Moody's Investors Service affirmed NXP B.V.'s and NXP Semiconductors N.V.'s ratings including the Ba2 Corporate Family Rating ("CFR") and raised the outlook to positive. Moody's also placed the ratings of Freescale Semiconductor Inc. on review for upgrade. These actions follow the announcement that NXP has signed a definitive agreement to acquire Freescale for about $11.8 billion in NXP shares and cash. NXP expects the acquisition to close in the second half of calendar year 2015. NXP plans to fund the acquisition using about US$9.8 billion worth of NXP shares plus about US$2 billion of cash. NXP has obtained committed financing. The Ba2 CFR reflects Moody's expectation that NXP will direct a majority of free cash flow to reduce debt such that through the combination of debt reduction and EBITDA growth, debt to EBITDA (Moody's adjusted) will decline to about 3x over the year following closing. Pro forma debt to EBITDA (Moody's adjusted, for the twelve months ended Dec. 31, 2014) is about 4x, which is high for the Ba2 rating. The acquisition will increase NXP's scale and diversification substantially, pushing NXP to the leadership position in automotive semiconductors, while free cash flow ("FCF") should continue to be strong due to the fab-lite manufacturing model of both firms. The fab-lite model also limits the integration risks, with restructuring expected to be focused on administrative and support functions rather than operational functions. The positive outlook reflects Moody's expectation that NXP will prioritize FCF for debt repayment such that through a combination of debt repayment and EBITDA growth, debt to EBITDA (Moody's adjusted) will decline to about 3x over the year following closing. The positive outlook also reflects Moody's expectation that the integration will progress smoothly and that NXP will demonstrate progress in achieving the anticipated operating synergies, which Moody's expects to reach about US$200 million in 2016. The outcome of the Freescale review will depend on the nature of the support provided by NXP, as well the final mix and outstanding amounts of secured and unsecured debt in the capital structure of the combined company. Moody's expects that the remaining US$402 million of Freescale's 10.75% unsecured notes due 2020 will be repaid in 2015. Following this payment, Freescale will have US$4.9 billion of debt outstanding (all secured; earliest debt maturity in 2020). NXP's ratings could be upgraded if there are clear indications of a successful integration including achievement of operating synergies. Moody's expects NXP to reduce leverage through a combination of debt repayment and EBITDA growth such that debt to EBITDA (Moody's adjusted) is sustained below 3x and FCF to debt (Moody's adjusted) is sustained above 10%. The rating could be downgraded if NXP is not on-course to reduce debt to EBITDA (Moody's adjusted) to below 4.0x or FCF to debt (Moody's adjusted) remains below the upper single digits percent. Issuer: NXP B.V. -- Outlook, Changed To Positive From Stable Issuer: NXP Semiconductors N.V. -- Outlook, Changed To Positive From Stable Affirmations: Issuer: NXP B.V. -- Probability of Default Rating, Affirmed Ba2-PD -- Corporate Family Rating , Affirmed Ba2 -- Senior Secured Bank Credit Facility, Affirmed Ba1 -- Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 Issuer: NXP Semiconductors N.V. -- Senior Unsecured Conv./Exch. Bond/Debenture, Affirmed B1 On Review for Possible Upgrade: Issuer: Freescale Semiconductor, Inc. -- Probability of Default Rating, Placed on Review for Possible Upgrade, currently B2-PD -- Corporate Family Rating (Local Currency), Placed on Review for Possible Upgrade, currently B2 -- Senior Secured Bank Credit Facility (Revolver and Term Loans), Placed on Review for Possible Upgrade, currently B1 -- Senior Secured Regular Bond/Debenture, Placed on Review for Possible Upgrade, currently B1 -- Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Upgrade, currently Caa1 Outlook Actions: Issuer: Freescale Semiconductor, Inc. -- Outlook, Changed To Rating Under Review From Stable NXP B.V., based in Eindhoven, Netherlands, makes high performance mixed signal integrated circuits and discrete semiconductors used in a wide range of applications, including automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer and computing. Freescale Semiconductor, Inc. designs and manufactures embedded semiconductors for the automotive, networking, industrial and consumer markets. Blackstone, Carlyle, Permira and TPG own about 64% of the company. The principal methodology used in these ratings was Global Semiconductor Industry Methodology published in December 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. =========== N O R W A Y =========== NORWEGIAN ENERGY: Shareholders Back Restructuring Plan ------------------------------------------------------ Niamh Burns at Energy Voice reports that a restructuring proposal for Norwegian Energy Company ASA, Noreco, has been approved at an annual general meeting. The company said a qualified majority voted to consider the plans and the issuance of shares upon conversion of bonds, Energy Voice relates. According to Energy Voice, Noreco will now together with Nordic Trustee and their respective advisors continue the process of documenting new bond terms and issuance of the new shares. A spokesman, as cited by Energy Voice, said the company expects that trading in its shares and bonds -- which have been suspended -- was expected to resume on March 4. Last year, the company put forward a restructuring proposal to stakeholders following a temporary suspension of its shares on the Oslo Stock Exchange, Energy Voice recounts. The company has faced a number of financial difficulties following the shutdown of the Huntington field which resulted in impairments of about NOK700 million and NOK100 million, Energy Voice relays. Norway-based Noreco is a publicly owned, independent E&P company with focus on exploration, development and production of oil and gas in the North Sea region. SCANA STEEL: Files for Bankruptcy Following Losses -------------------------------------------------- Scana Industrier ASA has decided to cease further funding of its subsidiary Scana Steel Stavanger ASA. Consequently there is no basis for a solvent winding-up of the company and the Board of Scana Steel Stavanger resolved to file for bankruptcy March 3, 2015. Scana Steel Stavanger has over a long period incurred substantial losses and has implemented a strong restructuring and workforce reduction in an attempt to achieve profitable business. Coincident with the restructuring and workforce reductions Scana Industrier has attempted to find new owners for Scana Steel Stavanger without success. It has not been possible to achieve profitable business and adequate order reserves. Scana Industrier has considered if there is basis for a solvent winding-up of Scana Steel Stavanger, but is not able to cover the costs and the liquidity requirements involved in a solvent winding-up. Nor has it been possible to gain external financing. Thus, filing for bankruptcy is the sole option for the Board of the company, and the financial situation implies that the company must file for bankruptcy now. In connection with the bankruptcy Scana Industrier will incur additional cost related to guarantees for certain Scana Steel Stavanger obligations. Except for this, Scana Industrier has currently not identified further funding obligations related to the bankruptcy in Scana Steel Stavanger. It is expected that the group's banks will cover their claims against Scana Steel Stavangerthrough sale of assets granted as collateral security to the group's banks. Scana Industrier is actively pursuing an extension of the Scana group's existing credit facilities with the bank syndicate. As previously communicated, these facilities expire at March 22, 2015, but the bank syndicate has on certain terms confirmed that the facilities are extended to June 22, 2015. This gives the group and the bank syndicate time to negotiate terms and conditions for a more permanent financing solution. In this context, the bank syndicate has confirmed that they will not consider the insolvency proceedings in Scana Steel Stavanger as an event of default under the group's credit facilities. Claims under the credit facilities caused by the bankruptcy filing will only be brought against Scana Steel Stavanger, and not against other companies in the group, unless this is necessary in order to bring claims against and be covered by securities granted by Scana Steel Stavanger. Scana Industrier sincerely regrets the negative impact the bankruptcy of Scana Steel Stavanger will have on the Company's business partners and the local community affected. Except as set out above, the bankruptcy in Scana Steel Stavanger will in the boards assessment not have any substantial adverse effects for other companies in the group. The board is, however, of the view that a bankruptcy in Scana Steel Stavanger may be a contributing factor in connection with a permanent extension of the credit facilities on new terms. Scana Steel Stavanger AS is today Norway's sole special steel works and one of Europe's leading suppliers of special steel. =========== P O L A N D =========== * POLAND: Records 60 Corporate Bankruptcies in February ------------------------------------------------------- According to Poland AM's Alicja Ciszewska, Euler Hermes, a credit insurance company published a report analyzing the situation of Polish companies which bankrupted last month. In February, 60 Polish companies went bankrupt, 12 less than in February last year, their turnover totaled PLN700 million, their employment was 1,200 people, Poland AM says citing the Ministry of Justice. =============== P O R T U G A L =============== SAGRES' DOURO: S&P Lowers Rating on Class A Notes to 'BB' --------------------------------------------------------- Standard & Poor's Ratings Services lowered its credit rating on SAGRES Sociedade de Titularizacao de Creditos, S.A.'s Douro Mortgages No. 3's class A notes. At the same time, S&P has affirmed its ratings on the class B, C, and D notes. Upon publishing S&P's updated criteria for rating single- jurisdiction securitizations above the sovereign foreign currency rating (RAS criteria), S&P placed those ratings that could potentially be affected "under criteria observation". Following S&P's review of this transaction, its ratings that could potentially be affected by the criteria are no longer under criteria observation. The rating actions follow S&P's credit and cash flow analysis of the most recent transaction information that S&P has received dated December 2014. S&P's analysis reflects the application of its residential mortgage-backed securities (RMBS) criteria and its RAS criteria. Under S&P's RAS criteria, it applied a hypothetical sovereign default stress test to determine whether a tranche has sufficient credit and structural support to withstand a sovereign default and so repay timely interest and principal by legal final maturity. S&P's RAS criteria designate the country risk sensitivity for RMBS as "moderate". Under S&P's RAS criteria, a transaction's notes can be rated four notches above the sovereign rating, if they have sufficient credit enhancement to pass a minimum of a "severe" stress. However, as not all of the conditions in paragraph 48 of the RAS criteria are met, S&P cannot assign any additional notches of uplift to the ratings in this transaction. As S&P's unsolicited long-term rating on the Republic of Portugal is 'BB', its RAS criteria cap at 'BBB+ (sf)' the maximum potential rating for all classes of notes in this transaction. The transaction has a reserve fund, which is at its target level and currently represents 1.20% of the outstanding notes' balance. Severe delinquencies of more than 90 days at 1.58% are lower than S&P's Portuguese RMBS index. This transaction features a provisioning mechanism for loans approaching default. This mechanism traps an increasing amount of cash within the transaction as loans move through delinquency toward default. Prepayment levels remain low and the transaction is unlikely to pay down significantly in the near term, in S&P's opinion. Following the application of S&P's RAS criteria and its RMBS criteria, S&P has determined that its assigned rating on each class of notes in this transaction should be the lower of (i) the rating as capped by S&P's RAS criteria and (ii) the rating that the class of notes can attain under S&P's RMBS criteria. In this transaction, S&P's rating on the class A notes is constrained by the rating on the sovereign. Under S&P's RAS criteria, the available credit enhancement for the class A notes is not sufficient to withstand the stresses that S&P applies at rating levels higher than 'BB'. Consequently, S&P has lowered to 'BB (sf)' from 'BBB- (sf)' its rating on the class A notes. The available credit enhancement for the class B, C, and D notes is insufficient to withstand any additional stress under S&P's RAS criteria. Therefore, S&P cannot apply any notches of uplift above the sovereign rating. Based on S&P's RMBS criteria and the fact that there is excess spread and a full reserve fund supporting all classes of notes, S&P believes that the available credit enhancement for the class B, C, and D notes is commensurate with the currently assigned ratings. S&P has therefore affirmed its 'B (sf)' rating on the class B notes and its 'B- (sf)' ratings on the class C and D notes. S&P also considers credit stability in its analysis. To reflect moderate stress conditions, S&P adjusted its weighted-average foreclosure frequency assumptions by assuming additional arrears and fluctuations on house prices for one-year and three-year horizons. This did not result in S&P's rating deteriorating below the maximum projected deterioration that it would associate with each relevant rating level, as outlined in S&P's credit stability criteria. S&P expects severe arrears in the portfolio to remain at their current levels due to moderate economic growth and high unemployment. S&P expects the real estate market to stabilize in 2015. However, price rises will likely be limited to 1.0% in 2015, as housing demand will stay constrained. Douro Mortgages No. 3 is a Portuguese RMBS transaction, which closed in July 2007 and securitizes first-ranking mortgage loans. Banco BPI S.A. originated the pool, which comprises loans backed by properties in Portugal. POTENTIAL EFFECTS OF PROPOSED CRITERIA CHANGES S&P's ratings are based on its applicable criteria, including those set out in the criteria article "Update To The Criteria For Rating Portuguese Residential Mortgage-Backed Securities". However, these criteria are under review. As a result of this review, S&P's future criteria applicable to rating transactions backed by Portuguese mortgage assets may differ from S&P's current criteria. These criteria changes may affect the ratings on the outstanding RMBS transactions that S&P rates. Until such time that S&P adopts new criteria, it will continue to rate and surveil these transactions using its existing criteria. RATINGS LIST Class Rating Rating To From SAGRES Sociedade de Titularizacao de Creditos, S.A. EUR1.515 Billion Mortgage-Backed Floating-Rate Securitisation Notes (Douro Mortgages No. 3) Rating Lowered A BB (sf) BBB- (sf) Ratings Affirmed B B (sf) C B- (sf) D B- (sf) * Portuguese Mortgage Arrears Slow But Defaults Peak, Fitch Says ---------------------------------------------------------------- Fitch Ratings says the volume of defaulted Portuguese residential loans has reached a new high, but the rate of increase has slowed and new arrears cases are at their lowest level for a decade. There are signs that the fragile economic recovery and low interest rate environment are reducing the stress on the Portuguese mortgage market. The proportion of loans in early- stage arrears fell to 0.5% in 2H14, the lowest level seen in the past 10 years and less than half of the peak figures of 2008-9. Late-stage arrears are also down on peak levels and remained at around 1% during 2014. The pace of new defaults has also slowed so that the constant default rate stood at 0.5% in 4Q14, down from 1.5% two years earlier, but this did not prevent the total stock of defaulted loans from reaching a record high. The slow pace of recoveries on defaulted loans means that the outstanding net defaults reached 3.9% of the overall portfolio balance. Properties sold following lender enforcement have achieved average prices 30% below their original valuations. There are signs that the market has become more liquid with smaller distressed sales discounts now expected than in the trough of the economic downturn in 2012. Portuguese home prices have been broadly flat, although indices report quarter-on-quarter fluctuations, including a 2.3% decline in 4Q14. The Algarve region is experiencing the largest correction with prices falling a further 5.4% during 2014. Demand for housing is limited but constrained supply of mortgages is also weighing on the market. New mortgage lending in Portugal remains depressed at around 10% of pre-crisis highs. Fitch's 'Mortgage Market Index - Portugal' is part of the agency's quarterly series of index reports. It includes information on the performance of residential mortgages, predominantly from RMBS transactions, but also those held on bank balance sheets. The report sets the housing market against the macroeconomic background and provides commentary on the emerging trends. The data behind the Mortgage Market Index report is also shown in the RMBS Compare which is an Excel-based tool for displaying the performance of individual transactions against each other and Fitch's benchmark indices. It also includes indicators of the broader mortgage markets, home prices and macro-economic background. =========== R U S S I A =========== AHML INSURANCE: Moody's Affirms 'Ba2' Financial Strength Rating --------------------------------------------------------------- Moody's Investors Service confirmed the insurance financial strength rating of AHML Insurance Company at Ba2 with a negative outlook. This rating action concludes the review for downgrade that commenced on Jan. 21, 2015. AHMLIC is a subsidiary of the Agency for Housing Mortgage Lending OJSC ("AHML OJSC", Ba1 negative), which is 100% owned by the Russian Federal Government and is a public policy vehicle for promoting mortgage lending and increasing housing affordability in Russia. This action follows our recent downgrade of Russia's government bond rating to Ba1 from Baa3 on Feb. 20, 2015 and a similar one- notch downgrade of AHML OJSC's issuer rating to Ba1 from Baa3 (negative outlook) on Feb. 24, 2015. AHMLIC's insurance financial strength of Ba2 reflects (a) a standalone credit assessment of B2 and (b) three notches of implied support from the parent company, AHML OJSC (Ba1 negative). Despite the recent downgrade of Russia and AHML OJSC, Moody's confirmed AHMLIC's financial strength rating at Ba2 because we believe that (a) its standalone credit assessment (excluding consideration of parental support) already reflects appropriate expectations of higher mortgage losses under current economic conditions, and that (b) the parent is committed to provide necessary support to AHMLIC in this difficult economy as it tries to use AHMLIC to buoy the Russian mortgage market. As a result of the challenging economy, Moody's believes that AHMLIC will likely be called upon to do more to facilitate the parent's public policy mission. For example, even though the primary and secondary mortgage markets in Russia are largely frozen at the moment, risk-averse lenders and private mortgage insurers appear to be keenly interested in shedding more of their existing and prospective mortgage risks to AHMLIC. Therefore, while the parent has less capacity to support AHMLIC (as suggested by the recent downgrade of the parent), it has more incentive to utilize and support AHMLIC as mortgage credit tightens. Because of these offsetting factors, Moody's continue to maintain three notches of parental support on AHMLIC's rating. The negative rating outlook mirrors the negative outlook of AHML OJSC and Russia's bond rating. An upgrade of AHMLIC's rating is unlikely given that it has a negative outlook. However, the following factors could return the outlook to stable: (i) affirmation of AHML OJSC's rating with a stable outlook, (ii) explicit forms of support from AHML OJSC, (iii) no meaningful rise in mortgage delinquencies. Conversely, the following factors could lead to a downgrade of AHMLIC's rating: (i) downgrade of AHML OJSC or reduced government support for the mortgage insurance market; (ii) ballooning of mortgage delinquencies beyond those experienced in the 2008-09 crisis; and/or (iii) adjusted risk-to-capital ratio significantly greater than 10x (adjusted for nonprime loans and RMBS insured exposure). The following rating has been confirmed with a negative outlook: AHML Insurance Company -- insurance financial strength at Ba2 global scale. AHML Insurance Company, based in Moscow, Russia, writes mortgage insurance and reinsurance in all regions of Russia. The company was established in 2010 with a public policy mission to develop the mortgage insurance market, institute legal and regulatory framework and standards for mortgage insurance, and create innovative insurance products. The principal methodology used in this rating was Moody's Global Methodology for Rating Mortgage Insurers published in December 2012. HOME CREDIT: Moody's Lowers Long-Term Deposit Ratings to 'B2' ------------------------------------------------------------- Moody's Investors Service has taken rating actions on 10 Russian banks reflecting the deterioration in the operating environment in Russia (Ba1 negative), which negatively impacts the banks' financial fundamentals. The banks are -- Absolut Bank, Home Credit & Finance Bank, Khanty-Mansiysk Bank Otkritie PJSC, NBD Bank, OTP Bank (Russia) OJSC, Transcapitalbank JSC Bank, Commercial Bank Agropromcredit (LLC), Russian Standard Bank, Tinkoff.Credit Systems, and AK BARS Bank. All ten Russian banks carry negative outlook on their long-term ratings. Moody's believes that the recessionary environment in Russia will adversely affect the asset quality and profitability of the 10 Russian financial institutions, given the agency's expectation of a GDP contraction of 5.5% in 2015 and 3% in 2016. Overall, Moody's expects total problem loans in the system to double, and given the low probability of a quick recovery in the economy banks' credit losses could exceed those seen during the 2008-09 crisis. Specifically, accelerated inflation and low salary growth will reduce the creditworthiness of retail borrowers and weaken consumption, negatively affecting banks' asset quality in the retail, SME, construction and real-estate segments. In addition, a substantial devaluation of the Russian rouble has affected the debt-service capacity for borrowers with loans denominated in foreign currencies and will negatively weigh on the creditworthiness of importers and trade companies, given the expected substantial contraction in imports. In addition, an elevated interest-rate environment, likely to remain in place in the near term, has increased funding costs in the banking system. In a low-growth environment, the banks will struggle to pass increased funding costs to their customers. This will result in a contraction of interest margins and, consequently, operating revenues. Overall, the operating revenue contraction combined with a substantially increased cost of risk is likely to generate a loss-making year for the banking system. As a result, Russian banks' capital buffers, which have already come under pressure recently, could decline further in the absence of the prompt capital injections. ABSOLUT BANK: The negative outlook assigned to Absolut Bank's B1 deposit ratings reflects the vulnerability of the bank's financial fundamentals to the negative operating environment in Russia. Similar to other Russian banks, Moody's expects that Absolut Bank's asset quality will weaken in this year and next , thus exerting negative pressure on the bank's profitability and capital levels. In addition, the rating agency notes elevated risks attributable to Absolut Bank's non-core investment in land, which accounted for approximately one third of the bank's total capital as at year-end 2014. Moody's considers that land assets have low liquidity in today's weak real-estate market in Russia. Therefore, any negative adjustments on this investment's carrying value could materially reduce the bank's capital level. The RUB3 billion capital injection committed by the bank's controlling shareholder -- a group of management companies affiliated with Russia's Non-State Pension Fund "Blagosostoyanie" -- only partially alleviates the rating agency's view that the bank might be challenged to sustain a robust capital buffer amidst the current unfavorable macroeconomic conditions. HOME CREDIT & FINANCE BANK: The adverse trends in the operating environment and their impact on asset quality and the profitability of Home Credit and Finance Bank's prompted Moody's to lower the BCA to b2 from b1, while the bank's BFSR of E+ is maintained with a stable outlook, which reflects the re-positioning of the b2 BCA within the E+ category. Taking into account the recessionary economic environment, particularly the weakening creditworthiness of Russian consumers, the bank's levels of problem loans will remain high this year and next, surpassing those posted in 2014. The bank's problem loans have already grown to 16.8% of the average loan book as of Q3 2014 relative to 11.7% as of end-2013. At the same time, the high cost of funding will put pressure on the bank's net interest margin. Diminishing income from stable sources, in combination with persistently high provisioning expenses will cause the bank to remain loss-making in 2015, according to Moody's opinion. However, the bank's still-strong capital buffer (a capital adequacy ratio of 23.9% as of Q3 2014) will help absorb anticipated losses and should remain adequate for its business risk profile. KHANTY-MANSIYSK BANK OTKRITIE PJSC: Anticipating elevated pressure on the bank's financial profile from the weakened operating environment, Moody's lowered Khanty- Mansiysk bank Otkritie's (KhMBO) BCA to b2 from b1 and downgraded the long-term supported deposit ratings to B1 from Ba3. In particular, Moody's expects an increase in KhMBO's provisioning expenses both for corporate and retail loans driven by deteriorating market conditions. The recent merger with Bank Otkritie, which formerly focused on unsecured consumer loans (60% of loans), heightens KhMBO's credit risk profile given the currently worsening situation in the consumer banking sector. Moody's expects that the accelerating asset quality pressures, negative revaluation of securities portfolio, and narrowing net interest margin on the back of higher funding costs will constrain KhMBO's profitability and capitalisation. The rating agency incorporates a high probability of parental support from Bank Otkritie Financial Corporation PJSC (BOFC; Ba3/Negative), resulting in one notch of uplift from the bank's b2 BCA. Moody's bases this support assumption on BOFC's ultimate majority ownership, the close strategic fit and importance of KhMBO to the consolidated financial position of BOFC. NBD BANK: The negative outlook assigned to NBD Bank's B1 long-term deposit ratings reflects the severe deterioration in Russia's operating environment, which will pressure the bank's asset quality and profitability in 2015. The impact is aggravated by the bank's significant exposure to the one of the most vulnerable segments, SMEs (more than 90% of the bank's loan portfolio), which may lead to a detrimental effect on the bank's asset quality. At the same time, the affirmation of NBD Bank's B1 deposit ratings takes into account the bank's strong loss-absorption cushion and supportive liquidity profile. The bank reported regulatory Tier 1 and Total Capital ratios of 10.2% and 14.5% as of end-January 2015, respectively, while its ability to maintain sound recurring earnings and tight control over operating expenses will somewhat mitigate the negative impact of asset quality weakening on the bank's capital profile. The bank's liquid assets cover almost a third of its liabilities, while customer accounts (76% of liabilities as at year-end 2014) have been stable during the recent periods of turbulence, and wholesale funds have a relatively favorable repayment schedule (half of them or 10% of liabilities are due in 2017-20). OTP BANK (RUSSIA), OJSC: Moody's has maintained OTP Bank Russia's BFSR of E+, but lowered its BCA to b2 from b1 within the E+ category. The negative adjustment of the bank's BCA was prompted by the bank's loss- making performance driven by growing provisioning expenses in 2014 and expected further pressure on the bank's capital position from anticipated operating revenue compression and high credit costs, owing to the challenging credit conditions in 2015-16. At the same time, OTP Bank Russia's local-currency deposit rating of Ba3 was affirmed along with a negative outlook as it incorporates two notches of uplift from its standalone BCA of b2 due to Moody's assessment of a high probability of support from the bank's ultimate shareholder OTP Bank NyRt (FC Ba2 negative, D negative /ba2). TRANSCAPITALBANK JSC BANK: Moody's expects further pressures on the bank's asset quality and profitability driven by the weakening of borrowers' creditworthiness in the context of a sharp economic contraction and elevated interest-rate environment. The rating agency changed the outlook on the bank's deposit ratings at B1 to negative from stable. The adverse impact is aggravated by the bank's exposure to the SME sector (35% of gross portfolio at year-end 2014), which could be particularly vulnerable to deterioration in the economic environment. Over the first nine months of 2014, the bank reported net income of RUB1.6 billion, which translates into a moderate, but declining, annualzsed return on average assets (ROAA) of 1.5%, compared with 1.7% in 2013 and 1.8% in 2012. Given increasing credit and funding costs, Moody's expects the bank might be close to break-even in 2015. At the same time, the bank's provisions and capital buffers provides sufficient cushion to absorb potential credit losses stemming from increased pressure on the loan book's credit quality, with the reported Tier 1 and Total capital adequacy ratios standing at 10.9% and 14.2%, respectively, as of Q3 2014. COMMERCIAL BANK AGROPROMCREDIT (LLC): The negative outlook assigned to Commercial Bank Agropromcredit (LLC) (APC)'s B2 long-term deposit ratings reflects the bank's subdued profitability and the rapidly deteriorating operating environment in Russia, which will further pressure the bank's revenues. APC has demonstrated poor recurrent profitability over the past several years with core revenues (net interest and commission income) failing to fully cover operating expenses. Raised funding costs, continuing market volatility, and expected asset-quality weakening will continue to pressure the bank's financial fundamentals. At the same time, APC's ratings are underpinned by its better- than-market average risk profile and adequate capital cushion. The credit costs of APC's corporate loans have not exceeded 2% over the past decade, while provisioning charges on the bank's consumer loans accounted for 5.7% of gross loans in 2014 compared to the market median of above 20%. The quality of the bank's loan book is supported mainly by its focus on a niche segment: creditworthy entities operating in the energy sector (half of corporate portfolio), and a significant portion of retail loans to individuals with payroll accounts in APC (employees of the bank's corporate clients). Given Moody's expectation of APC's asset-quality development in the next 18 months as well as the introduced cost cutting measures, current capital buffers should assist the bank in managing the anticipated bottom-line losses (regulatory total capital adequacy ratio stood at 13.8% as at end-January 2015). RUSSIAN STANDARD BANK: The decision to maintain the negative outlook on the bank's long- term ratings reflects the rating agency's expectation of further deterioration in the bank's asset quality owing to the weak operating environment, particularly Russian consumers' weakening creditworthiness. Russian Standard Bank's provisioning expenses already increased to 18.2% of gross loans in H1 2014 (year-end 2013: 10.0%, and year-end 2012: 6.9%), while its return on average assets turned negative at -2.6% in H1 2014 (year-end 2013: 0.6%). Decreasing operating income and persistently high credit costs will likely lead to further net losses in 2015, despite tightening of the bank's underwriting standards. These pressures are only partially mitigated by Russian Standard Bank's strong problem loans coverage metrics, which are better than the bank's domestic consumer-lending peers (the loan-loss reserves- to-problem loans ratio was at 123.5% as at H1 2014). The decision to maintain the bank's BFSR/BCA of E+/b2 and to affirm of its long-term ratings reflects the bank's improving capital buffer owing to an extension of the bank's USD350 million subordinated bonds to 2020, which will help to increase the bank's regulatory capital ratio to around 17% compared with only 12.1% as of 1 November 2014. TINKOFF CREDIT SYSTEMS: This year and next, Moody's expects additional pressure on Tinkoff.Credit Systems' asset quality and profitability given the deteriorating labor market conditions, a decline in individuals' real disposable income and higher cost of funding. As a result, Moody's changed the outlook on the bank's B2 deposit rating to negative from stable. In affirming the bank's deposit ratings at B2 and maintaining the BFSR at E+(BCA b2) , Moody's pointed to Tinkoff.Credit Systems' franchise, its significant capital cushion and strong revenue generation. Although down significantly from 7.1% reported in 2013, Tinkoff.Credit Systems' managed to post an annualized return on average assets of 3.8% for the first nine months of 2014. Reported Tier 1 and total capital adequacy ratios amounted to 21.2% and 26.6%, respectively, under Basel III as of Q3 2014. AK BARS BANK: Moody's decision to change the outlook to negative on AK BARS bank's E+ BFSR (BCA of b3) and supported B1 debt and deposit ratings reflects the accelerated pressure on the bank's financial fundamentals from the severe deterioration in Russia's operating environment. The anticipated deterioration in asset quality with an increasing provisioning burden and the negative revaluation of the securities portfolio would negatively affect the bank's currently weak core profitability. AK BARS's current capital buffer looks limited in the context of an expected increase in credit losses, exposure to market risk (equities amounted to RUB10.6billion or 35% of the bank's shareholder capital as of H1 2014 under IFRS) and investment property (RUB10 billion as of 1 February 2015 according to unaudited IAS). Its current loss- absorption capacity is insufficient without external capital injections. Moody's notes that the bank targets to strengthen its capitalization and on 25 February 2015 the bank's Board of Directors approved a capital injection of RUB 9.8billion to be provided in 2015. AK BARS Bank benefits from support and links to the Republic of Tatarstan (Ba2 on review for downgrade) and its related companies given its high market share in Tatarstan (around 40%), indirect controlling ownership by the regional government, and a track record of support in the form of capital injections, purchase of bad loans and non-core assets. Moody's currently incorporates a moderate probability of support from the regional government into the bank's ratings, resulting in a two-notch uplift from the bank's BCA of b3. Moody's considers that upward pressure on the ratings of all 10 banks is unlikely in the near term because the key drivers of today's actions relate to the weakening of their credit profiles, owing to the severe and rapid deterioration in the operating environment in Russia. Moody's could downgrade the banks' ratings if there is any further erosion of their standalone credit profiles. Conversely, the outlooks on the long-term debt and deposit ratings could be changed to stable if there are improvements in the operating environment conditions. ABSOLUT BANK -- BFSR was maintained at E+ (equivalent to a BCA of b1) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at B1; outlook revised to negative. HOME CREDIT & FINANCE BANK -- BFSR was maintained at E+ (lowered BCA to b2 from b1) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were downgraded to B2 from B1; negative outlook; -- Senior unsecured rating was downgraded to B2 from B1; negative outlook; -- Backed senior unsecured MTN program rating was downgraded to (P)B2 from (P)B1; -- Backed subordinate rating was downgraded to B3 from B2; negative outlook; -- Backed subordinate MTN program rating was downgraded to (P)B3 from (P)B2;. KHANTY-MANSIYSK BANK OTKRITIE PJSC -- BFSR was maintained at E+ (lowered BCA to b2 from b1) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were downgraded to B1 from Ba3; outlook revised to negative; -- Subordinate rating was downgraded to B3(hyb) from B2(hyb); outlook revised to negative; NBD BANK -- BFSR was maintained at E+ (equivalent to a BCA of b1) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at B1; outlook revised to negative. OTP BANK (RUSSIA), OJSC -- BFSR was maintained at E+ (lowered BCA to b2 from b1) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at Ba3 with negative outlook. TRANSCAPITALBANK JSC BANK -- BFSR was maintained at E+ (equivalent to a BCA of b1) with stable outlook; -- Long-term foreign-currency deposit rating was affirmed at B1; outlook revised to negative; -- Subordinate rating was affirmed at B2; outlook revised to negative. COMMERCIAL BANK AGROPROMCREDIT (LLC) -- BFSR maintained at E+ (equivalent to a BCA of b2) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at B2; outlook revised to negative. RUSSIAN STANDARD BANK -- BFSR maintained at E+ (equivalent to a BCA of b2) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at B2 with negative outlook; -- Senior unsecured ratings were affirmed at B2 with negative outlook; -- Senior unsecured MTN program rating was affirmed at (P)B2; -- Subordinate ratings were affirmed at B3 and Caa1(hyb) with negative outlook; -- Subordinate MTN program rating was affirmed at (P)B3; -- Backed subordinate rating was affirmed at B3 with negative outlook. TINKOFF.CREDIT SYSTEMS -- BFSR maintained at E+ (equivalent to a BCA of b2) with stable outlook; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at B2; outlook revised to negative; -- Senior unsecured rating was affirmed at B2; outlook revised to negative; -- Subordinate rating was affirmed at B3; outlook revised to negative; -- Backed senior unsecured was affirmed at B2; outlook revised to negative. AK BARS BANK -- BFSR maintained at E+ (equivalent to a BCA of b3); outlook revised to negative; -- Long-term local-currency and foreign-currency deposit ratings were affirmed at B1; outlook revised to negative; -- Senior unsecured ratings were affirmed at B1; outlook revised to negative; -- Senior unsecured MTN program rating was affirmed at (P)B1. MECHEL OAO: Taps Rotschild to Help with Debt Restructuring ---------------------------------------------------------- PRIME reports that a Mechel OAO official told PRIME on March 4 the debt-ridden company has signed a deal with consulting agency Rothschild Group to negotiate with its creditors. According to PRIME, Forbes reported earlier citing a source close to one of the deal participants that Rothschild could find a way to restructure Mechel's debt that would suit its key creditors Sberbank, Gazprombank, and VTB. Creditor banks, whom Mechel owed US$7 billion as of Dec. 1, demand a dismissal of Mechel President and core owner Igor Zyuzin and control over the company, PRIME relays. Mr. Zyuzin suggested Mechel issue bonds for state-owned Vnesheconombank, which will be later converted into 85% of Mechel's capital, but the plan was rejected, PRIME notes. Mechel, PRIME says, is also preparing documents to ask the government for help under an anti-crisis plan. The government is currently considering a draft regulation that would allow firms that bailout a company to confiscate its property from owners, PRIME discloses. Mechel OAO is a Russian metals and mining group. ========= S P A I N ========= HIPOCAT 8: S&P Affirms 'CCC' Rating on Class D Notes ---------------------------------------------------- Standard & Poor's Ratings Services affirmed its credit ratings on Hipocat 8, Fondo de Titulizacion de Activos' class A2, B, C, and D notes. Upon publishing S&P's updated criteria for Spanish residential mortgage-backed securities (RMBS criteria) and its updated criteria for rating single-jurisdiction securitizations above the sovereign foreign currency rating (RAS criteria), S&P placed those ratings that could potentially be affected "under criteria observation". Following S&P's review of this transaction, its ratings that could potentially be affected by the criteria are no longer under criteria observation. The affirmations follow S&P's credit and cash flow analysis of the transaction information that it has received in October 2014. S&P's analysis reflects the application of its RMBS criteria. As all of S&P's ratings in this transaction are below its long- term rating on the Kingdom of Spain (BBB/Stable/A-2), S&P has not applied its RAS criteria. Interest on the class B notes will be deferred if the difference between the outstanding balance of the class A notes and the available funds, after payment of the B notes' interest, is greater than the sum of the outstanding balance of the mortgages and the amortization account. Interest on the class C notes will be deferred if the difference between the outstanding balance of the class A and B notes and the available funds, after payment of the C notes' interest, is greater than the sum of the outstanding balance of the mortgages and the amortization account. Interest on the class D notes will be deferred if the difference between the outstanding balance of the class A, B, and C notes and the available funds, after payment of the D notes' interest, is greater than the sum of the outstanding balance of the mortgages and the amortization account. Credit enhancement for the class A2 notes has increased to 17.28%, from 14.45% at S&P's previous review. Class Available credit enhancement (%) A2 17.28 B 11.71 C 4.14 D (2.81) This transaction features a reserve fund that is currently fully drawn to cover losses. The reserve has been fully drawn since the fourth quarter of 2013. Severe delinquencies of more than 90 days at 4.84% are on average in line with S&P's Spanish RMBS index. Defaults are defined as mortgage loans in arrears for more than 18 months in this transaction. Cumulative defaults are equal to 4.29%. Prepayment levels remain low and the transaction is unlikely to pay down significantly in the near term, in S&P's opinion. After applying S&P's RMBS criteria to this transaction, its credit analysis results show a decrease in the weighted-average foreclosure frequency (WAFF) and an increase in the weighted- average loss severity (WALS) for each rating level. Rating level WAFF (%) WALS (%) AAA 47.45 28.13 AA 38.36 23.98 A 32.39 17.30 BBB 24.33 13.90 BB 17.95 11.65 B 15.71 9.66 The decrease in the WAFF is mainly due to the higher originator adjustment S&P has applied (to account for the relatively poor performance of the Hipocat transactions compared with the Spanish market in general) only partially offsetting the lower arrears projections. The increase in the WALS is mainly due to the application of S&P's revised market value decline assumptions. The overall effect is an increase in the required credit coverage for the 'AAA' to 'A' rating levels. Taking into account the results of S&P's updated credit and cash flow analysis, it considers the available credit enhancement for the class A2, B, C, and D notes to be commensurate with S&P's currently assigned ratings. S&P has therefore affirmed its 'BBB- (sf)' rating on the class A2 notes, its 'BB (sf)' rating on the class B notes, its 'B- (sf)' rating on the class C notes, and its 'CCC (sf)' rating on the class D notes. In S&P's opinion, the outlook for the Spanish residential mortgage and real estate market is not benign and S&P has therefore increased its expected 'B' foreclosure frequency assumption to 3.33% from 2.00%, when S&P applies its RMBS criteria, to reflect this view. S&P bases these assumptions on its expectation of modest economic growth, continuing high unemployment, and house prices leveling off in 2015. On the back of improving but still depressed macroeconomic conditions, S&P don't expect the performance of the transactions in its Spanish RMBS index to improve in 2015. S&P expects severe arrears in the portfolio to remain at their current levels, as there are a number of downside risks. These include weak economic growth, high unemployment, and fiscal tightening. On the positive side, S&P expects interest rates to remain low for the foreseeable future. Hipocat 8 is a Spanish RMBS transaction, which closed in May 2005. The transaction securitizes a pool of first-ranking mortgage loans that Catalunya Banc (formerly named Caixa Catalunya) originated. The mortgage loans are mainly located in Catalonia and the transaction comprises loans secured over owner- occupied properties. RATINGS LIST Hipocat 8, Fondo de Titulizacion de Activos EUR1.5 Billion Mortgage-Backed Floating-Rate Notes Ratings Affirmed Class Rating A2 BBB- (sf) B BB (sf) C B- (sf) D CCC (sf) MADRID RMBS I: Fitch Cuts Rating on Class C Tranche to 'B-sf' ------------------------------------------------------------- Fitch Ratings has downgraded 10 tranches of three Madrid RMBS transactions, a series of Spanish prime RMBS comprising loans originated by Caja Madrid and serviced by Bankia S.A. (BBB- /Negative/F3). The agency has also affirmed a further seven tranches from the three transactions. KEY RATING DRIVERS Recalibrated Adjustments to Foreclosure Frequency While the underlying performance of the portfolios has improved since 2009, borrowers with certain characteristics continue to underperform. Borrowers with loans originated through brokers, who are foreigners, self-employed and/or have an original mortgage tenor of more than 30 years, make up a higher proportion of arrears cases. For such loans, Fitch has standard criteria assumptions to account for their higher likelihood of default. Loan-by-loan level data for the three Madrid RMBS portfolios, provided by the European Data Warehouse, suggests that the propensity of such borrowers to default is not as high as specified in Fitch's mortgage loss assumptions for Spain. As a result, in its analysis of the pools the agency reduced the adjustments to the 'Bsf' foreclosure frequency for foreign, self- employed borrowers, broker-originated loans as well as for loans with mortgage tenor beyond 30 years. High Period Defaults The transactions' structures allow for the full provisioning of defaulted loans, defined as loans in arrears by more than six months. The current average annualized constant default rate (CDR) across the three transactions is 1.9%. This is above Fitch's CDR index for Spanish RMBS of 1.2%. Over the past 12 months, gross excess spread (on average 0.4% across the three deals) and recoveries from the sale of properties taken into possession have been insufficient to fully provision for period defaults. With reserve funds depleted for more than two years, the pipeline of un-provisioned defaults has increased on average by 1% of the current note balance. This is reflected in today's one-notch downgrades of the senior and mezzanine notes in all three deals. Limited Recoveries on Properties in Possession Based on Fitch's analysis of 448 properties taken into possession and sold for the three transactions, Fitch does not expect future recoveries to significantly reduce the current level of un- provisioned loans. The average quick sale adjustment on a sold property is 53%, which is noticeably higher than the 45% assumed by our criteria. As a result, the agency revised upward its standard market value decline assumptions to account for this difference and this has been reflected in our recovery assumptions derived for the transactions. Given a lengthy enforcement process and large property overhang in Spain, Fitch expects the flow of recoveries to remain slow for these transactions. The volume of outstanding defaults across the pools and the high reliance of the structures on the future inflow of recoveries mean that credit enhancement levels will be under pressure. For this reason the agency is maintaining the Negative Outlook on all the tranches. RATING SENSITIVITIES Deterioration in asset performance may result from economic factors, in particular the increasing effects of unemployment. An increase in new defaults and associated pressure on excess spread levels and reserve funds beyond Fitch's expectations could result in downgrades. The rating actions are as follows: Madrid RMBS I, FTA Class A2 (ES0359091016) downgraded to 'BBB-sf' from 'BBBsf'; Outlook Negative Class B (ES0359091024) downgraded to 'BB-sf' from 'BBsf'; Outlook Negative Class C (ES0359091032) downgraded to 'B-sf' from 'Bsf'; Outlook Negative Class D (ES0359091040) affirmed at 'CCCsf'; Recovery estimate 0% Class E (ES0359091057) affirmed at 'CCsf'; Recovery estimate 0% Madrid RMBS II, FTA Class A2 (ES0359092014) downgraded to 'BBB-sf' from 'BBBsf'; Outlook Negative Class A3 (ES0359092022) downgraded to 'BBB-sf' from 'BBBsf'; Outlook Negative Class B (ES0359092030) downgraded to 'BB-sf' from 'BBsf'; Outlook Negative Class C (ES0359092048) downgraded to 'B-sf' from 'Bsf'; Outlook Negative Class D (ES0359092055) affirmed at 'CCCsf'; Recovery estimate 0% Class E (ES0359092063) affirmed at 'CCsf'; Recovery estimate 0% Madrid RMBS III, FTA Class A2 (ES0359093012) downgraded to 'BB-sf' from 'BBsf'; Outlook Negative Class A3 (ES0359093020) downgraded to 'BB-sf' from 'BBsf'; Outlook Negative Class B (ES0359093038) downgraded to 'B+sf' from 'BB-sf'; Outlook Negative Class C (ES0359093046) affirmed at 'CCCsf'; Recovery estimate 0% Class D (ES0359093053) affirmed at 'CCsf'; Recovery estimate 0% Class E (ES0359093061) affirmed at 'Csf'; Recovery estimate 0% REYAL URBIS: Net Loss Down 14% to EUR694 Million in 2014 -------------------------------------------------------- Property Investor Europe reports that on the eve of a decision by lenders over the acceptance of Reyal Urbis's rescue plan, the firm announced net losses of EUR694 million for 2014, down 14%, and the lenders will have to decide if it can be restructured. Major creditors will now decide if the company has made enough progress to avoid liquidation and thus pave the way for its release from bankruptcy, PIE says. The deadline for a decision has been set for March 13, PIE discloses. In its rescue proposal filed in mid-February, Reyal Urbis put net debt at EUR3.98 billion, PIE relays. Of this, it has offered to pay down EUR2.9 billion through a fire sale of real estate assets to creditors at haircuts of around 80%, PIE says, citing Europa Press. Of the stricken group's more than 20 creditors, the major lenders are Sareb, the property work-out bank with EUR600 million, Santander (EUR480 million) and ICO (EUR220 million), PIE notes. If they opt for the rescue plan, Reyal Urbis would become a stripped-down version of its former self with significantly fewer assets and a manageable debt, according to PIE. Presided over by Rafael Santamaria, the property group went into bankruptcy two years ago after the failure of its fourth refinancing, PIE recounts. Reyal Urbis is a Spanish real estate group. TDA 31: Moody's Raises Rating on EUR14.5MM C Notes to 'B2' ---------------------------------------------------------- Moody's Investors Service upgraded the ratings of twenty six notes and confirmed the rating of one note in seven Spanish residential mortgage-backed securities (RMBS) transactions: TDA 14-MIXTO, FTA (TDA 14-MIXTO); TDA 15-MIXTO, FTA (TDA 15-MIXTO); TDA 16-MIXTO, FTA (TDA 16-MIXTO); TDA 17-MIXTO, FTA (TDA 17- MIXTO); TDA 18-MIXTO, FTA (TDA 18-MIXTO); TDA 20-MIXTO, FTA (TDA 20-MIXTO) and TDA 31, FTA (TDA 31). The rating action concludes the review of twenty seven notes initiated on Jan. 23, 2015. The rating upgrades reflect (1) the increase in the Spanish local-currency country ceiling to Aa2, (2) the reduction in the portfolio credit enhancement (MILAN CE) in all transactions except Group 2 of TDA 16-MIXTO and (3) in case of group 2 of TDA 17-MIXTO the decrease of the expected loss assumption due to better collateral performance than expected. The rating confirmation indicates that the credit enhancement is commensurate with current rating for the affected class of notes. The country ceilings reflect a range of risks that issuers in any jurisdiction are exposed to, including economic, legal and political risks. On Jan. 20, 2015, Moody's announced a six-notch uplift between a government bond rating and its country risk ceiling for Spain. As a result, the maximum achievable rating for structured finance transactions was increased to Aa2 (sf) from A1 (sf) for Spain. During this rating review, Moody's reassessed the loan-by-loan information using the latest pool cut files to determine each transaction's MILAN CE. Additionally, on Jan. 20, Moody's announced that the minimum portfolio CE is no longer applicable for most EMEA markets following the updates to its ABS and RMBS rating methodologies. Following the reassessment and the updated methodology, Moody's reduced the MILAN CE for most of the deals (except for TDA 16-MIXTO group 2 for which it was maintained) as shown below: - TDA 14-MIXTO: to 8.0% from 10.0% for Group 1; to 10.0% from 11.1% for Group 2, - TDA 15-MIXTO: to 9.0% from 10.0% for Group 1; to 11.0% from 12.8% for Group 2, - TDA 16-MIXTO: to 9.0% from 10.0% for Group 1, - TDA 17-MIXTO: to 9.0% from 10.0% for Group 1; to 16.0% from 21.0% for Group 2, - TDA 18-MIXTO: to 9.0% from 10.0% for Group 1; to 12.5% from 14.0% for Group 2, - TDA 20-MIXTO: to 9.0% from 10.0% for Group 1; to 11.0% from 12.0% for Group 2, - TDA 31: to 17.0% from 20.4%. Moody's reassessed its lifetime loss expectation taking into account the collateral performance of the transactions to date. Moody's increased the expected loss assumption on TDA 15-MIXTO Group 2 to 0.796% from 0.73% and on TDA 16-MIXTO Group 2 to 0.98% from 0.90% as of original pool balance. Moody's decreased the expected loss assumption on TDA 17-MIXTO Group 2 to 1.263% from 1.50%. Expected loss assumption was maintained for the other transactions and groups. Moody's rating analysis also took into consideration the exposure to key transaction counterparties including servicer, account bank and swap provider. Different entities are acting as servicers of TDA 14-MIXTO, TDA 15-MIXTO, TDA 16-MIXTO, TDA 17-MIXTO, TDA 18-MIXTO and TDA 20- MIXTO. Today's rating action takes into account the servicer commingling exposure to the relevant entities for each of them as well as to Banco Sabadell, S.A. (Ba2/NP) for TDA 31. Moody's has also assessed the exposure to JP Morgan Chase Bank, N.A. (Aa3/P-1) and HSBC Bank plc (Aa3/P-1) acting as swap counterparties for TDA 20-MIXTO and TDA 31 respectively. The exposure to the swap counterparties does not constraint any rating in these two transactions. The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in January 2015. Factors or circumstances that could lead to an upgrade of the ratings include (1) further reduction in sovereign risk, (2) performance of the underlying collateral that is better than Moody's expected, (3) deleveraging of the capital structure and (4) improvements in the credit quality of the transaction counterparties. Factors or circumstances that could lead to a downgrade of the ratings include (1) an increase in sovereign risk, (2) performance of the underlying collateral that is worse than Moody's expects, (3) deterioration in the notes' available credit enhancement and (4) deterioration in the credit quality of the transaction counterparties. List of Affected Ratings: Issuer: TDA 14-MIXTO, FTA -- EUR326.4M A3 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR126.6M ANC Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR18.7M B1 Notes, Upgraded to Aa3 (sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade -- EUR8.1M BNC Notes, Upgraded to A1 (sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade Issuer: TDA 15-MIXTO, FTA -- EUR228.9M A1 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR200.8M A2 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR9.5M B1 Notes, Upgraded to Baa1 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade -- EUR11.7M B2 Notes, Upgraded to A3 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under Review for Possible Upgrade Issuer: TDA 16-MIXTO, FTA -- EUR377.4M A1 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR130.4M A2 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR15.1M B1 Notes, Upgraded to Aa3 (sf); previously on Jan 23, 2015 Baa1 (sf) Placed Under Review for Possible Upgrade -- EUR9.1M B2 Notes, Upgraded to Aa3 (sf); previously on Jan 23, 2015 A3 (sf) Placed Under Review for Possible Upgrade Issuer: TDA 17-MIXTO, FTA -- EUR395M A1 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR43.8M A2 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR14M B1 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A3 (sf) Placed Under Review for Possible Upgrade -- EUR2.2M B2 Notes, Upgraded to A1 (sf); previously on Jan 23, 2015 A3 (sf) Placed Under Review for Possible Upgrade Issuer: TDA 18-MIXTO, FTA -- EUR301.7M A1 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR95.6M A2 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR11.3M B1 Notes, Upgraded to A1 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade -- EUR12.4M B2 Notes, Upgraded to A3 (sf); previously on Jan 23, 2015 Baa2 (sf) Placed Under Review for Possible Upgrade Issuer: TDA 20-MIXTO, FTA -- EUR297.1M A1 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR105.6M A2 Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR7.9M B1 Notes, Upgraded to Baa2 (sf); previously on Jan 23, 2015 Ba1 (sf) Placed Under Review for Possible Upgrade -- EUR10.4M B2 Notes, Upgraded to Baa2 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade Issuer: TDA 31, FTA -- EUR280.5M A Notes, Upgraded to Aa2 (sf); previously on Jan 23, 2015 A1 (sf) Placed Under Review for Possible Upgrade -- EUR6M B Notes, Confirmed at Baa3 (sf); previously on Jan 23, 2015 Baa3 (sf) Placed Under Review for Possible Upgrade -- EUR13.5M C Notes, Upgraded to B2 (sf); previously on Jan 23, 2015 B3 (sf) Placed Under Review for Possible Upgrade =========================== U N I T E D K I N G D O M =========================== ACE TRAVEL: HMRC Winding up Order Drives Firm to Liquidation ------------------------------------------------------------ accountancylive.com reports that Ace Travel North West Ltd, a bus firm based in Liverpool has entered liquidation as a result of a winding up order from Her Majesty's Revenue and Customs, with the loss of 60 jobs The latest tax cases at First Tier and Upper Tribunal including Barnes tax avoidance scheme, Ingenious Games and Bristol & West closure notice error, according to accountancylive.com. The report discloses that Ace Travel's management announced it had fallen behind with payments to HMRC covering a period of around 18 months and believed to total GBP220,000. The company said it had managed to raise investment of GBP114,000 towards paying the tax bill and, after taking professional advice, had put forward a payment plan that it said would have cleared the bill by the end of this year, the report relays. However, Ace Travel claimed the case was then transferred to a tax office in Worthing which rejected the previous agreement and demanded full payment, the report notes. Following this decision, HMRC issued a winding-up order. Speaking to local media, Ace Travel director Alan Denson said: 'I can't believe they have done this. We did fall behind with payments, fair enough, but we had a payment scheme in place and we would have paid it by the end of the year. To have a settlement in place and the Revenue to knock it back is just sickening," the report notes In a statement an HMRC spokesperson said: "HMRC does not in general comment on the tax affairs of individual businesses, but our aim is to efficiently collect the debts due and to prevent things deteriorating further. Anyone who anticipates payment problems should call us as early as possible as we have an outstanding track record for supporting those with genuine problems," the report notes. "We only initiate winding up action where we believe this is the best way to protect both the interests of other taxpayers and creditors," the spokesman added. A spokesperson for Merseytravel said it had been made aware of Ace Travel's intention to put the company into liquidation at the weekend, and the authority said it was 'currently looking at options for the immediate future of the services and longer term,' the report adds. AFRREN PLC: Defaults on US$15-Mil. Debt Payment Amid Rescue Talks ----------------------------------------------------------------- Ben Martin at The Telegraph reports that Afren, the struggling oil explorer, has defaulted on a US$15 million debt payment and warned shareholders that a rescue by its creditors, which would significantly dilute stock market investors, is looming. The company was originally due to pay interest on its bonds maturing in 2016 at the start of February, but had deferred the payment using a 30-day grace period, The Telegraph notes. It said on March 4 that it had decided not to pay the US$15 million in an attempt to preserve cash as it races to agree a rescue deal, The Telegraph relays. "While such non-payment will result in a default under the 2016 notes, this will not result in an immediate obligation to repay such 2016 notes or any cross-default under its 2019 notes or 2020 notes or its other debt facilities," The Telegraph quotes the company as saying. Investors holding about 55% of the bonds have pledged not to take "enforcement action" over the default to give the company breathing space to agree a refinancing, The Telegraph discloses. The company cautioned on March 4 that an emergency funding deal is likely to come from its debtors, rather than "third party investors", The Telegraph relates. It also repeated a warning that such a rescue would hit equity investors, The Telegraph notes. Afren plc is an international independent oil exploration and production company. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index. JAGUAR LAND: S&P Rates Proposed US$500MM Sr. Unsecured Bonds 'BB' ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB' issue rating and '3' recovery rating to the proposed US$500 million senior unsecured bond to be issued by U.K.-based automaker Jaguar Land Rover Automotive PLC (JLR). S&P's recovery expectations are in the higher half of the 50%-70% range for a recovery rating of '3'. The issue and recovery ratings on the proposed $500 million senior unsecured bond are based on preliminary information and are subject to the successful issuance of this bond and S&P's satisfactory review of the final documentation. S&P understands that JLR intends to use the proceeds from the proposed bond to prepay the $410 million 8.125% senior unsecured notes due 2021, and the proceeds from the recently issued GBP400 million 3.875% senior unsecured bond due 2023 to prepay the GBP500 million 8.25% senior unsecured notes due 2020. The amounts prepaid will depend on the take-up of announced tender offers. Remaining proceeds would be available for general corporate purposes. The final terms of the bond will be subject to market conditions. RECOVERY ANALYSIS S&P's recovery expectations are underpinned by JLR's strong brand names and constrained by the unsecured nature of the notes. S&P understands that the documentation for the proposed notes will not include any restrictions on indebtedness. S&P's hypothetical default scenario assumes a deterioration in JLR's operating performance amid an economic and financial downturn. S&P believes that this would lead to a steady decline in revenue, deteriorating profitability, and negative free cash flow. S&P values JLR as a going concern given its notable market positions, its strong brand names, and what S&P considers to be the relatively creditor-friendly insolvency regime in the U.K. Simulated default assumptions: -- Year of default: 2019 -- EBITDA at default: GBP708 million -- Implied enterprise value multiple: 5x -- Jurisdiction: U.K. Simplified waterfall: -- Gross enterprise value: GBP3.54 billion -- Prior-ranking liabilities: GBP871 million (1) -- Net value available to creditors: GBP2.67 billion -- Senior unsecured debt: GBP3.83 billion (1)(2) -- Senior unsecured recovery expectation: 50%-70% (higher half of range) (1) All debt amounts include six months of prepetition interest. (2) S&P assumes the RCF is 85% drawn, in line with its criteria. ********* 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 2015. 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 * * *